Discovery's new phase of growth results in strong performance

Johannesburg - On 4 March, Discovery presented its interim financial results for the six-months ended 31 December 2024 to the investor community.

Group Chief Executive, Adrian Gore, provided context to the Group's strong performance and consistent growth across the two composites of the business. "We have emerged from a cycle of significant investment, which focused on creating new avenues for long-term growth, through globalising our capabilities and footprint, and building new ventures, most notably Discovery Bank. The Bank, in this period, achieved monthly profitability in December and returned its first profit ahead of plan. The current strong in-period performance across the Group, shows that we are well-positioned for a phase of scaled organic growth, with focused execution through our newly formed global composite, Vitality, and our domestic business, Discovery South Africa," he said.

The period delivered growth in normalised operating profit, up 27% to R7 020 million, headline earnings, up 34% to R4 267 million and normalised headline earnings, up 34% to R4 350 million. The Group's embedded value increased to R120 billion and the positive contribution from experience variances over the period reflected the competitive dynamics of the Group's Shared-value Insurance model.

The key financial highlights include:

Discovery South Africa: Normalised operating profit increased 27% to R5 520 million as the composite focused on driving quality new business at appropriate margins, with new business increasing 6%, excluding the prior period take-on of the Sasolmed closed medical scheme.

• Discovery Bank: Delivered a 42% increase in total revenues and has now achieved monthly operational profitability with continued excellent performance across all key metrics. It is well positioned to leverage its scale, data and capabilities to drive growth across the composite.
• Discovery Health: The administrator of Discovery Health Medical Scheme and 18 closed medical schemes delivered robust earnings growth, while continuing strategic investments in technology, innovation, artificial intelligence, and personalised healthcare. New business increased 9%, excluding the Sasolmed closed medical scheme take-on in the prior period (decreased 31%, including Sasolmed).
• Discovery Life: Delivered strong earnings and cash generation with positive claims experience and maintained its market-leading retail market share and new business margins. Group life new business, which is lumpy by nature, declined over the period.
• Discovery Invest: Delivered significant earnings growth, benefitting from strong market performance and some one-off gains for the period.
• Discovery Insure: Delivered an excellent recovery in operating margin, and also benefited from benign weather conditions.

Vitality: The composite's normalised operating profit increased by 27% to R1 500 million and new business API increased 8%.

• VitalityHealth: Operating profit increased 15% to £25.9 million (14% to R599 million). The business has successfully actioned price adjustments over the past 18 months to mitigate increased private medical insurance utilisation, with the strong retention of in-force business resulting in a 16% increase in earned premiums.
• VitalityLife: Operating profit increased by 8% to £14.1 million (8% to R327 million). The business utilised its advanced price optimisation to deliver a 19% increase in new business Annualised Premium Income of high quality (39% excluding automatic contribution increases), despite a stagnant UK market.
• Vitality Network: Operating profit increased by 20% to US$18.9m (15% to R339 million), as margins increased from 31% to 35%. Membership grew by 26% to 6.2 million, demonstrating the global relevance of the Shared-value Insurance model.
• The Group's share of Ping An Health Insurance's after-tax operating profit increased by 23% to R424 million, following strong gains from Chinese bond and equity market movements in the period and continued operating delivery. Within VHI Other, Vitality USA acquired WellSpark, further progressing its expansion from its traditional focus on the employee wellness market towards the significantly larger addressable market of integrated digital health and care. Amplify Health successfully deployed nine health tech solutions across multiple Asia-pacific markets.

Gore highlighted that Discovery's growth strategy is based on the efficacy, repeatability, and scalability of its model through organic growth and global partnerships. The Group's strong performance demonstrates the effective deployment of the model and its applicability across the different industries and markets.

The model's evolution to hyper-personalisation, leveraging the Group's data and technology assets, will continue to improve key value drivers. The Vitality AI platform and its capabilities will allow greater and more precise understanding of people's health risks and determine the exact actions to improve health outcomes, quantifying the impact on health and mortality.

Gore further emphasised that the Group demonstrated continued financial resilience and remains well positioned to manage potential volatility in the current macro-environment.

He said the two powerful and focused composites – Discovery South Africa and Vitality – and the strong platforms in each, are resulting in growth in earnings, cash generation, and return on equity, as well as lower leverage. "Following the emergence from a period of sustained investment, we have seen a strong performance, which is expected to result in further growth in profit from operations in 2025, exceeding our medium-term ambition of 15% to 20%, driven, in particular, by a second-half recovery in the UK."

In line with this, the Group has declared its interim ordinary dividends for the period at 87 cents per share, consistent with the growth in normalised headline earnings.