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DSY - Discovery Holdings Limited - Trading statement for the nine months ended
31 March 2011
DISCOVERY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
ISIN: ZAE000022331
Share Code: DSY
("Discovery" or "the Company")
TRADING STATEMENT FOR THE NINE MONTHS ENDED 31 MARCH 2011
Introduction
Discovery`s strong performance during the interim financial reporting period
to 31 December 2010 continued over the first quarter of the 2011 calendar
year, with all operating entities performing in line with expectation. During
the period, Discovery continued to make significant progress towards achieving
its stated strategic objectives, being the attainment of quality growth in its
South African businesses; scale, profitability and relevance in its
international business; and launching new businesses that leverage the unique
presence and footprint of Discovery in South Africa.
On the basis of the current performance, and recognising the effect of the
accounting entries relating to the acquisition of Standard Life Healthcare,
earnings per share for the financial year to June 2011 are expected to be at
least 20% higher than that reported during the 2010 financial year. In
addition, on a normalised basis - which adjusts for the effect of transactions
related to the Standard Life Healthcare acquisition, and therefore provides a
more accurate measure of the operating performance of the Group - normalised
headline earnings per share are also expected to show an improvement of more
than 20% over the prior period.
Shareholders are further referred to the SENS announcement dated 24 June 2011
in which they were advised that Discovery intends to introduce a new class of
equity capital. The new class of capital, being non-cumulative, non-
participating, non-convertible, perpetual preference shares, will support the
current strong growth in Discovery`s existing businesses, as well as make
available efficient capital for emerging strategic opportunities.
The forecast financial information on which this trading statement is based
has not been reviewed and reported on by the Company`s external auditors.
Group overview and operational highlights
South African operations
The strong performance of Discovery`s South African businesses, being
Discovery Health, Discovery Life, Discovery Invest, Vitality and
DiscoveryCard, continued over the first quarter of 2011, with a continuing
focus on attracting and retaining select, high-quality members, ongoing
product development, and the realisation of incremental operating efficiencies
across the business. Specific highlights by business include:
- Discovery Health: Total medical scheme membership surpassed the 2.5
million lives level, with ongoing low lapse levels. In the context of the
acquisition of a number of large closed schemes in the comparative
period, new business growth remained strong.
- Discovery Life: Risk new business (excluding ACI`s) for the 9-month
period grew at similar rates to those achieved during the first 6-months,
with mortality and morbidity experience performing better than expected,
and lapses tracking in line with assumption.
- Discovery Invest: Retail Assets under Management reached R16.5bn during
June 2011, with continued beneficial asset mix and excellent fund
performance.
In addition to the performance of the existing businesses, the period under
review also saw the launch of Discovery Insure, Discovery`s entry into the
short-term insurance market. Discovery Insure is the next manifestation of the
Discovery model, and is complementary to Discovery`s existing businesses.
Initial interest in the Discovery Insure offering has been high, and above
expectation.
International operations
Discovery continues to pursue two distinct strategies internationally; first,
a focus on achieving scale, relevance and profitability in the UK with
PruHealth and PruProtect, and second, operationalising the joint ventures in
China and the US with Ping An Group of China and Humana Inc., respectively.
Specific highlights of the international operations include:
- PruHealth: Intense focus has been applied to the management of the loss
ratio, lapse rate and expense levels over the period. Further progress
has been made in integrating the former PruHealth and Standard Life
Healthcare businesses in the key areas of people, systems, service and
product.
- PruProtect: PruProtect delivered a strong operating performance for the 9-
month period across the dimensions of new business, claims and expenses.
- The Vitality Group: Work continues to operationalise HumanaVitality, the
joint venture with Humana, for a launch during the second half of
calendar 2011. From a stand-alone Vitality perspective, The Vitality
Group continues to develop a pipeline of activity, and will leverage the
additional capital received from the Humana transaction, as well as the
scale of Humana in the US, to significantly enhance the wellness and
reward components of its program.
- Ping An Health: The current focus has been on transferring the Discovery
Health IP to China, and making the systems and protocols fit for purpose
for Ping An Health. From a product perspective, significant work has
taken place to tailor the Discovery capabilities to the Chinese market,
with a view to a number of small product launches towards the end of
2011, and into 2012.
Sandton
24 June 2011
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 24/06/2011 10:30:01 Supplied by www.sharenet.co.za
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