Banele Ginindza
DISCOVERY, the country’s biggest health insurer, yesterday said that it planned to raise as much as R5 billion to finance expansion as the company pursued new growth opportunities.
“The board has resolved to raise capital to pursue distinct opportunities for additional growth,” Discovery said.
“The capital of R4bn to R5bn will be raised by way of an underwritten renounceable rights issue, the terms of which will be finalised by March 10.”
Expansion
Discovery chief executive Adrian Gore hinted that between R1bn and R2bn could be deployed to support expansion into adjacent markets, while about R3bn could fund VitalityLife new business in the UK.
The rest could be used to further entrench and globalise Discovery’s model through partnerships with global insurers.
Fiscal first-half net income climbed to R3.5bn in the six months to December, from R1.71bn a year earlier, with profit doubling on new business and the acquisition of a stake in a Prudential unit, the company also said. Normalised diluted earnings per share, excluding one-time items, rose 17 percent to R3.40 and the company declared an increased interim dividend of 85.5c.
Discovery is offering the new shares at R90 each, compared with the R112.38 its stock traded at the Johannesburg Stock Exchange earlier yesterday.
The rights issue is underwritten by Rand Merchant Insurance.
The group saw considerable momentum across all businesses, according to Gore,.
“It’s been an incredible, I think, successful six months, with very strong organic growth from our businesses. We are well positioned for future growth.”
Private healthcare
Commenting on China, Gore said macro forces in China supported the case for private healthcare provision and financing.
The other potential boost was that the Chinese elderly population was set to exceed the entire US population by 2050, while a regulatory requirement for 20 percent of all hospital visits to be handled by private operators by the end of the year would be another positive.
Gore said the group was just scratching the surface of the Chinese market, and it had more potential to grow there.
Discovery shares dropped as much as 6.1 percent in Johannesburg trading, the biggest intraday decline since August 2013, before paring losses to close 1.13 percent lower at R114.10. – With additional reporting by Bloomberg