S.African insurer Discovery could consider future acquisitions
(Updates with more CFO comments)
JOHANNESBURG, Feb 21 (Reuters) - South African insurer
Discovery could expand through acquisitions in the
future but must first work out how its innovative fluctuating
premiums, based on clients' lifestyle behaviours, could be
applied to more traditional businesses.
Discovery has spent more than two decades growing from a
small upstart to a global player via organic growth and
partnerships. Buying another firm or insurance book would mark a
significant departure from that strategy but the company's
actuaries are looking at how this could work.
"We believe there is an opportunity there, it is being
worked on," CFO Deon Viljeon told Reuters in an interview on
Thursday. He later said the possibility of acquisitions was
remote for now and not yet part of the company's strategy, while
the bigger opportunity was applying its model to its partner's
The pricing and set up of older insurance books differs from
those of Discovery's. The company's dynamic premium model has
shaken up traditional approaches and been adopted by insurance
giants including China's Ping An and Manulife's
John Hancock in the United States.
Viljeon said this was a key reason why the company has built
businesses rather than bought them so far, but that he didn't
see the problem as impossible to solve.
Earlier on Thursday, during a presentation of Discovery's
interim results, CEO Adrian Gore said acquisitions would be
risky, but presented numerous opportunities.
Discovery reported a 16 percent drop in headline earnings
for the first half of its financial year after ploughing a fifth
of its earnings for the period into new business lines. It was
also hit by a spike in insurance payouts.
Its normalised, undiluted headline earnings per share -- a
key profit measure in South Africa that strips out one-off items
-- for the six-month period ended Dec. 31 stood at 366.6 cents
($0.2616), down from 438.5 cents last year.
The most significant spend was on Discovery Bank, which is
due to launch next month, with money also going to its
investment offering and the platform that enables partner
insurers to integrate its model into their own businesses and
adapt it to local markets.
Aside from Discovery Life, which had already flagged an
unexpected spike in large claims, operating profits at the
company's established health and life businesses in the UK and
South Africa grew by between 10 percent and 26 percent.
Newer lines Discovery Insure and Vitality Group, which
expands the model in new markets via partnerships, grew
operating profits by 114 percent and 179 percent respectively.
Pre-tax operating profits from its stake in Ping An rose 26
percent on the back of a 117 percent rise in new business
premiums to 2.1 billion yuan ($313.33 million).
The firm's shares were up 1.33 percent to 146 rand at 1146
($1 = 6.7023 Chinese yuan renminbi)
($1 = 14.0283 rand)
(Reporting by Emma Rumney; Editing by Rashmi Aich and Kirsten
First Published: 2019-02-21 14:51:17
Updated 2019-02-21 18:11:53
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