Discovery moves into Canada

No football fans, not Wayne Rooney and his merry bunch, rather Discovery are introducing Vitality to Canadian based financial service group Manulife, and not your beloved Red Devils. Which as far as I can tell (ducks under the table), are not having the best season in the history of everness (I made up a word). Their only consolation is that Chelsea are having a worse season. Whilst at face value this may seem like a "new" announcement, it is really an extension, the company operates under the brand name John Hancock in the US. You will recall from our message last year in April: John Hancock tie up. They have operations all over the world, a strong presence in Asia and in Europe. In fact, if you remember right, the company was a worldwide sponsor of the 2008 Olympic Games in Beijing.

All folks who use the Vitality program know it well, your single aim and goal is to tell your friends how awesome you are and how many Vitality points you have, whilst their savings and points levels resemble those of mere ordinaries and not superheroes. Or something along those lines. Not too much of a hurrah in the announcement on either of the websites, this one from Manulife: Manulife to reward Canadians for healthy living. Another example of the white labelling of the Vitality program, I am pretty sure that the product will be hugely successful with Canadian consumers looking for savings. Watch the associated video, it is fun. When John Hancock made the announcement, there were already 700 thousand Vitality members across the US.

Manulife is listed on the Toronto Stock Exchange, (it has an ADR program on the NYSE), the market cap in Canadian Dollars is nearly 35 billion Canadian Dollars. That makes it around 400 billion Rand, which on the ranking tables makes this huge business around the size of Vodacom and Old Mutual put together. It truly is an enormous business, it seems to trade on pretty good metrics, a yield of close to four percent (pre tax) and a earnings multiple of less than 14 times. Like most financials worldwide, the stock has been pounded recently, the three month return is minus 20 percent, marginally worse over 6 months. Over five years Manulife is down 7 percent, bottoming out in 2012 at around ten and a half Canadian Dollars, currently 17 and a half Dollars, there and there abouts.

I trawled through the annual report of Manulife in order to get an understanding of how many life insurance clients the group has in Canada. I could not find it sadly, they do always refer to millions of customers. This is another big scoop for Discovery. The Vitality program is nothing short of awesome for the life insurers. There are some startling facts in the Discovery Annual report around the Vitality program.

The impact of exercise on hospital admissions is profound. A survey of Vitality members has shown that members who exercise twice a week are 13% less likely to be admitted to hospital than those who rarely exercise. Members on the two highest Vitality statuses have an eight year longer life expectancy compared with members who are not on Vitality or who are on the lowest status.

As in that new Virgin Active advert (Get Up. Get Active.), get off your ass today. Ha ha! Good one. Highly engaged Vitality members claim 50 percent less than non-Vitality members. The trick is for the life insurers and medical aids to engage all their customers to become Vitality members and work hard on their health, by extension the claim levels drop. And that means that the profitability of the business increases significantly. That of course is excellent for your Discovery shares! So if you are a Discovery shareholder, make sure your fiends get out there and exercise and make healthier decisions. And then talk extensively about your Discovery Vitality status, that'll stump them. We continue to accumulate Discovery and expect more of these global partnerships.

I will leave you with an image from the Discovery presentation last year (via the Economist), percentage of adults that are physically inactive. I just don't get Russia, it is bitterly cold in winter. Colombia? What is that about, the weather is good there, not so?