Adrian Gore, CEO of Discovery. Photo: Leon Nicholas, Independent Media.

Health insurance group Discovery Holdings (DSY) on Tuesday reported a 25% increase in normalised headline earnings to 941 million rand for the six months ended December 2010.

This translated into diluted normalised headline earnings per share of 169.5 cents versus 135.9 cents for the previous comparable half-year.

Fully diluted headline earnings per share, however, were 16% lower than last time - 114.6 cents versus 135.9 cents.

Normalised profit from operations, excluding the once-off effects of the Standard Life Healthcare acquisition, reflected a 28% increase to 1.332 billion rand, with new business API up 15% to 3.747 billion rand and embeeded value up 15% to 24 billion rand.

The group declared an interim dividend of 42 cents per share, which was 27% higher than the previous interim dividend.

“Discovery posted strong results for the six-month period to 31 December 2010. While the period under review was complex, impacted by both the financial crisis and the considerable policy debates that affect the markets in which Discovery operates, the performance across Discovery's businesses was pleasing. Notably, during this period, the South African economy started to stabilise and consumer confidence increased. Discovery is strongly of the view that South Africa has made considerable progress on a number of important fronts and remains excited and optimistic about the country's future,” Discovery said.

The group said it continued to be focused on playing a positive leadership role in South Africa.

“Over the last 12 months, and particularly during the six-month period under review, Discovery focused on achieving growth in three key strategic areas:

1. In Discovery's South African businesses, quality, growth and innovation were the important areas of focus. In the context of Discovery Health, this enabled us to balance the natural tension that exists between offering access to best quality care and affordable premiums, and ensuring sustainable growth. For Discovery Life, this manifested in a significant reduction in lapse rates and superior mortality and morbidity experience. Vitality experienced significant increases in levels of engagement, thereby further entrenching Vitality's role as a differentiator through its integration capability and ability to improve mortality and morbidity experience. Discovery Invest continued to strengthen its position in the retail investment space with new product designs and platforms.

2. In Discovery's international businesses, a step-change in strategy was employed to achieve scale, profitability and relevance - with a focus on leveraging Discovery's unique intellectual property and capabilities to organically build businesses with minimal exposure to capital downside. In particular, the acquisition of Standard Life Healthcare, the significant work done within PruHealth and the continued successful roll-out of PruProtect, have created a business of significant size and potential in the United Kingdom. Furthermore, the important transaction concluded with Humana Inc. (Humana) in the United States and the acquisition of 20% of Ping An Health in China, provide considerable upside potential without significant capital risk.

3. A continued focus on building new businesses based on the unique business model of Discovery in the South African market.

“The results of these strategies were pleasing,” the group added. - I-Net Bridge