South Africa - Johannesburg - 28 March 2019 - Discovery building, Sandton. Picture: Karen Sandison/African News Agency(ANA)
South Africa - Johannesburg - 28 March 2019 - Discovery building, Sandton. Picture: Karen Sandison/African News Agency(ANA)

Discovery has put aside R3.44bn war chest for uncertain times

By Sandile Mchunu Time of article published Sep 17, 2020

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DURBAN - Insurer Discovery has put R3.44billion aside for Covid-19 claims and lapses to see it through the uncertainties created by the pandemic.

Chief executive Adrian Gore said yesterday that the fund would cover the expected effects for the year to end June to December 2021.

Gore said the fund had been budgeted for in the 2020 reporting year.

“The economy is in a difficult phase right now globally caused by the uncertainty created by Covid-19. However, Discovery has proven to be resilient during this period and we are well-positioned to come out of Covid-19 in a strong position,” Gore said.

Discovery calculated its Covid-19 provisions to estimate the future mortality, morbidity and economic effects of the pandemic by estimating excess mortality and excess lapses expected to arise in 2021 and 2022 on a variety of scenarios by setting a stressed, central and light scenario.

The pandemic has already caused a dent in the group’s full-year results as profits slumped 97 percent to R176million.

Core new business, however, rose 5percent to R19.17bn despite normalised operating profit falling 22percent after providing for the Covid-19 related impacts to R6.07bn.

The group said normalised headline earnings fell 26percent to R3.75bn and normalised headline earnings per share decreased 27percent to 566.7cents.

Discovery did not declare a final ordinary share dividend due to the uncertain and potentially volatile economic environment caused by the Covid-19 pandemic.

It said dividends would be considered when appropriate.

The group’s local combined new business fell 4percent to R12.28bn and operating profit increased by 11percent to R8.30bn before the Covid-19 provision but was down by 3percent after the provision.

Discovery Health’s normalised operating profit increased 5percent to R3.19bn and total revenue grew 8percent to R8.37bn, with non-scheme revenue showing accelerated growth of 23 percent.

Discovery Bank reported more than 370000 accounts during the period with deposits of R2.4bn. Its total credit limits granted were R5.5bn of which R2bn was utilised in the first year of the bank’s operation.

The group said its Ambition 2023 remains the strategic focus for the medium-term.

“The group is well-positioned for growth in its planning horizon to 2023, with the capital plan able to fund its new initiatives,” it said.

“The businesses in South African composite have created significant insurgency and the composite is well positioned to continue the SA growth trajectory. The UK composite is embryonic, however, the actions taken were key to ensure sustainability in the current environment and have positioned the business to capitalise in a normalised environment.”

Discovery declined 3.81percent on the JSE yesterday to close at R129.80.

BUSINESS REPORT

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