Discovery posts "temporary" fall in half year earnings
JOHANNESBURG - South Africa’s Discovery on Thursday reported a 16 percent drop in headline earnings for the first half of the year, due to ploughing funds into new businesses and large insurance claim pay outs.
The insurer, known for its dynamic premium model that links insurance costs to client behaviour, said its normalised, undiluted headline earnings per share for the six-month period ended Dec. 31 stood at 366.6 cents ($0.2616), compared to 438.5 cents last year.
Headline earnings per share is a key profit measure in South Africa that strips out one-off items.
“The performance for the period was a manifestation of the planned investment in five new businesses and a strong operating performance from all of Discovery’s businesses, except for Discovery Life,” the insurer’s statement said.
It described the first half of its financial year as a period of “exceptional growth”, with a “temporary” decline in profits.
Discovery, which propelled from an upstart 20 years ago to a global player, reinvested more than a fifth of its earnings for the period as it looks to export the model to new business lines and markets, the statement said.
Its most significant spend went on Discovery Bank, due to launch next month, with money also going to its investment offering and the technology platform that enables partner insurers to integrate its model into their own businesses and adapt it to local markets.
The insurer said its headline earnings were also hit by an increase in borrowing costs as it tapped creditors for funds for investment, fair value losses due to equity and bond market movements, and a change in accounting treatment on the lease for its head office building in Johannesburg.
The group has new and established divisions, as well as a number of fast-growing emerging business lines, including a stake in Chinese insurance giant Ping An, which saw 117 percent growth in new business premium to 2.1 billion yuan ($313.33 million), the statement said.
In its established businesses, Discovery Health saw normalised operating profits rise by 10 percent to just under 1.5 million rand.
Discovery had reported earlier in February that its life insurance unit had seen an unexpected spike in large life insurance payouts, which amounted to around 8 percent of earnings during the period.