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Discovery shows strong growth

Release Date: 26/02/2004 10:01
Code(s): DSY
Wrap Text

Discovery shows strong growth * Attributable profit up by 57% * Diluted headline earnings per share up 22%, following 36% additional shares in issue * Destiny Health expected to break even in February 2004 * Discovery Life new business premium income grows by 35% Discovery has produced a pleasing performance marked by strong organic growth for the six-month period ended 31 December 2003. Net profit attributable to shareholders grew by 57% to R135.3 million, while operating profit grew by 87% to R324.8 million. "These results flow from the continued application of our business methodology of innovation, product leadership and operational and financial excellence in pursuit of our goal of making people healthier and enhancing and protecting their lifestyles," says Discovery CEO Adrian Gore. "We believe that while new business at Discovery Health will continue to grow at a steady pace, future new business growth will increasingly come from Discovery Life and our US-based business, Destiny Health," says Gore. New Business at Destiny Health increased by 59%. Destiny Health is expected to achieve its goal of breakeven in February 2004, as a result of strong membership growth, from 21 800 to 28 400 as at 1 January 2004, and claims and expenses being contained in line with expectations. The trend towards empowering consumers to manage their healthcare expenses continues to grow in the US, creating an ideal environment for the distribution of Destiny Health"s Comprehensive Consumer-driven Healthcare model. In addition, recent amendments to Medicare legislation have introduced Health Savings Accounts to the US, which will provide significant tax advantages to Destiny members. This, coupled with its joint ventures with Guardian Life Insurance Company of America and Tufts Health Plan, leaves Gore optimistic that Destiny will achieve its next target of 50 000 lives by January 2005. During the period under review, the Discovery Health Medical Scheme membership grew to over 1.5 million members, and lapse rates reduced to an effective 3.3% per annum, the lowest in Discovery Health"s history. The Discovery Health Medical Scheme"s reserves reached the statutory requirement as at 31 December 2003 and currently stand at over R1.6bn, a figure equal to the sum of the reserves accumulated by the next nine largest medical schemes. Gore stated that Discovery Health aims to leverage its expertise and strengths to reduce contribution increases to a single digit increase in 2005, bringing the cost of healthcare cover more in line with salary inflation. Discovery Health, however, experienced a 20% reduction in new business, which Gore attributes to unusually high enrolment volumes during the December/January intake period last year. This arose from the annual open enrolment period required by legislation in January of each year. As the previous financial period reflected the first time this open enrolment period was implemented, a significant pent-up demand resulted in higher than usual new business inflows. Discovery Life"s performance exceeded expectations in the period under review - the number of policyholders increased from 70 000 to 100 000, with the value of in-force business increasing by 89% to R946.3 million. New Business at Discovery Life increased by 35%. Discovery Life"s risk-only approach to life assurance has become the norm and the company has established a leadership position in this market. The lack of an investment element in its product structure has protected Discovery Life against poor investment returns and the resulting fluctuations in financial performance experienced by other players in the industry. Growth at Discovery has always pivoted on product innovation and the period under review is in line with this trend. Says Gore: "In the local health business, we were able to bring down the cost of comprehensive cover with the introduction of our Priority Plans from Discovery Health. Internationally, Destiny Health enhanced their health insurance product with a payback that boosts member"s unspent premiums and an enhanced Vitality programme that enables members to purchase a large range of retail goods according to their Vitality status level. Looking forward, we expect continued product innovation to drive robust performances in our established businesses and we expect our start-up businesses to make greater contributions to the company"s overall performance." Ends. FOR FURTHER INFORMATION PLEASE CONTACT: Debbie Brewitt/Roz McComb Corporate Communications Consultants (Pty) Ltd Tel: (011) 783-8926 Fax: (011) 783-7608 E-mail: roslinm@corpcom.co.za Debbie Brewitt Cell: 084 616 7000 and Roz McComb Cell: 082 925 8806 On behalf of: Adrian Gore - CEO Discovery Contact: (011) 529-2800 Date: 26 February 2004 Date: 26/02/2004 10:01:03 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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