Vitality is key to Discovery's growth

Discovery"s Adrian Gore is pleased with the performance of the company in the first half of the year. Image: Discovery

"The Vitality business model‚ based on behavioural economics to encourage healthier choices from members‚ was the "strong chassis" driving the group's performance locally and in its international forays‚" he told a shareholder presentation of the group's results for six months to December.

"Discovery's strength is its repeatable‚ sustainable‚ scaleable model‚" he said.

Discovery reported a 33% rise in diluted headline earnings per share (HEPS) to 294.9c for the six months to December, up from 221.2c a year earlier. Diluted normalised HEPS grew by 20% to 289.9c from 243.1c.

The group said the results were in line with a trading update in which Discovery said it expected to report normalised HEPS had grown by between 15% and 20%. The medical aid declared an interim dividend of 73c per share.

The group's normalised profit from operations was 21% higher at R2.38bn. Discovery said new business annualised premium income was up 19% to R5.88bn.

New business growing

Discovery Health had grown new business off a large base by 15% to R2.6bn and operating profit by 13% to R860m. It now covered almost 2.9m individuals.

"The group's emerging businesses, Discovery Invest and the UK's PruHealth and PruProtect, had shown 33% growth in earnings‚" said Gore.

The more established businesses, Discovery Life and Discovery Vitality, grew earnings by 17%. The group's new businesses, Discovery Insure‚ Ping An Health in China and AIA Vitality in Southeast Asia, were not yet profitable.

Gore warned that the international new businesses should be seen as long-term investments and said investors should lower expectations that these businesses would deliver in the short-term.

The group was investing 9% of operating profit in these new ventures‚ with half of that going to Discovery Insure, which grew new business by 40%‚ or R257m‚ in the six-month period. The insurance company covers 60‚000 vehicles.

Gore pointed out that while new business in Ping An Health doubled over the period to R138m‚ it was still a relatively small market.

The group's UK businesses, PruHealth and PruProtect, increased their combined profit by 27% to R359m and new business by 35% to R982m‚ as the Vitality programme was introduced to this market. The UK operations had a combined client base of 774‚000 people.