|By PR Newswire||
|September 3, 2014 01:12 PM EDT||
JOHANNESBURG, Sept. 3, 2014 /PRNewswire/ -- Discovery Limited Group Chief Executive, Adrian Gore, today presented the Group's annual financial results for the year ended 30 June 2014. Discovery posted normalised profit from operations of USD 477.1 million, a 23% increase from the previous year – a figure driven strongly by new business growth of 15% to USD 1 169.3 million.
Gore commented, "The past financial year marked a period of strong performance for Discovery. There has been intense activity across our primary market in South Africa, our second primary market in the UK as well as our partner markets in China, the US, Singapore, and Australia. More importantly, we have done considerable work in refining the Discovery behaviour-based insurance model, which gears Discovery to address some of today's most critical societal problems in an innovative way."
In a difficult economic environment, Discovery's business model and strategy continue to deliver positive financial results, an aspect which Gore attributes to the responsiveness of the business model to a complex macro-economic environment. He continued to explain that consumers globally are expecting companies to play a socially-progressive role where the bottom line is not the only driving force of a company's actions. Given this increasing trend, insurance companies are well placed to meet this expectation, given their large risk pools and mandate to provide protection for life's uncertainties and risks. Importantly, many of these insurance risks are driven by member behaviour, which can be changed through tools and incentives.
Gore commented, "Discovery's business model is a powerful asset as it enables a composite view of a client's risk behaviour, which can include their nutrition and exercise habits, as well as their driving behaviour. By rewarding better behaviour, the actuarial dynamics improve considerably, resulting in savings across the business. These resultant risk savings are channeled back to the incentives required to deliver the positive behaviour change that ultimately are of equal benefit to our client."
The outcome is excellent member receptivity in all markets: favourable claims and lapse trends across all businesses; volume and revenue uplift for wellness and reward partners across Vitality, DiscoveryCard, and Discovery Insure; and a positive impact on healthcare costs, life expectancy, and road safety.
In Discovery's primary market of South Africa, Discovery Health's performance exceeded expectation with operating profit increasing 10% to USD 177.8 million, after continued efficiencies were passed onto Discovery Health Medical Scheme through a planned scale-related reduction in administration fees. In addition, Discovery Health new business increased 4% to USD 479.4 million; and lives under management for all schemes grew to 2.9 million.
Discovery Life demonstrated exceptional operating profit growth of 23% to USD 248.4 million over the period driven by new business growth of 6% to USD 193.0 million, better-than-expected claims and lapse results, improved renewal efficiencies, and disciplined expense control. Experience variances were positive by USD 54.8 million and the business generated USD 40.5 million in cash over the period, before allowing for the repayment of financial reinsurance.
Gore commented, "Discovery Life's performance further validates the efficacy of the model, and its unique shared value attributes. The model not only creates value for clients as they experience better value for money and policyholder returns, but the insurer benefits from superior actuarial dynamics and higher profit margins. This is the basis for successfully exporting the model to the UK and Asia."
Discovery's savings and investments arm Discovery Invest delivered a better-than-expected set of results with operating profit increasing 50% to USD 31.7 million, driven by the high growth of products sold and strong performance of the market. Assets under management increased to USD 4 billion, with new business API increasing by 30% to USD 133.8 million.
Discovery Insure has been one of the stand-out performers for Discovery over the past year; quickly developing into one of the fastest-growing short-term insurers in South Africa. New business was exceptional with 73% growth to USD 60.6 million and despite this growth, the business has contained the loss ratio and lapse rates. "Discovery's behaviour-based insurance model in short-term insurance is demonstrating the desired linkages between incentives and behaviour change, and creating further unique and innovative big data pathways to protect members and their assets," says Gore.
In partnership with US-based Cambridge Mobile Telematics, Discovery Insure launched a ground-breaking smartphone solution to accurately monitor complex driver behaviour at a granular level, and encourage safer driving in an intuitive, cost effective, and member-friendly way.
In Discovery's second primary market of the United Kingdom, the joint businesses of PruHealth and PruProtect delivered a combined operating profit of USD 60.2 million, up 33% from the previous period; new business growth of 35% to USD 204.1 million; and a combined member base of close to 800,000.
Gore said of the UK business, "The scale and relevance of Discovery's UK businesses reflect our vision to build an exemplar of the SA model and assets, manifesting in the best protection business in the UK. We have done considerable work to further build a strong foundation in the UK in terms of product design, the distribution network across direct and intermediary channels, an investment in the client journey and lastly, building the Vitality brand."
In the partner markets of China, US, Singapore, and Australia where Discovery has joint ventures with leading insurers, the company continued its investment in product development, building out the sales and distribution capabilities and marketing initiatives. Ping An Health entrenched its position as the largest and fastest-growing health insurer in China with an expanded individual product range, an enhanced service to brokers and clients, and leveraging both internal and external distribution channels. This resulted in excellent new business growth of 119% to USD 32.5 million. Gore commented, "We are starting to see the growth of a new product category in China with many members being first-time purchasers of a comprehensive private health insurance product. The work done by Ping An Health over the past year positions the company well to grow this potential market."
In the US and Asia, Discovery invested in further developing the structure of Vitality. In the US, The Vitality Group is increasingly being acknowledged as the top wellness provider. Key developments included product and benefit enhancements, new Vitality partners, the strengthening of The Vitality Group's sales and distribution capability, and superior levels of members' engagement compared to industry.
Concluding with comments on Discovery's youngest partnership, a joint venture with insurance giant AIA in Singapore and Australia, Gore said, "AIA Vitality's early data illustrates the relevance of Discovery's business model to the Asian market where the products have gained instant recognition as being leading risk products, as judged by both the industry and intermediaries."
SOURCE Discovery Limited (DSY)
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