Discovery 6M numbers - going from strength to strength

Yesterday Discovery released their interim results for the six months ending 31 December 2017. As expected from the trading update, the numbers looked good. Operating profit increased by 19% while normalised headline earnings per share increased by 31% to R4.11. The big drivers behind the growth in earnings was a solid showing from the UK business as well as profits coming through for the first time from the short-term insurance business as well as the Ping An joint venture.

The image below shows the contribution of each segment.



As always, Adrian Gore was very confident and passionate. He didn't skip a beat in his presentation. You can see he truly believes in his product and is genuinely proud that it is making the world a better place.

The local businesses all did well in a tough environment. Discovery Health and Life are the bread and butter of this business. As you can imagine, growth has slowed, but they are still stealing market share. If our economy goes through a growth spurt, these businesses will thrive. That includes Discovery Insure and Discovery Invest who have both leveraged off a good brand and some great incentive schemes.

Vitality UK is finally doing well. They now have over 1 million lives insured in a country where healthcare is mostly free. When your friends are getting free Apple watches, Starbucks coffees and discounted gym contracts because they exercise three times a week, the clients become the best salesmen. The preventative healthcare model is genius. It is cheaper and far better for your standard of living, to prevent than being cured.

Vitality Group. This is the part of their business that sells the Vitality model to third parties. This is what excites me most about Discovery. Selling on the preventive healthcare model to other insurers who have millions of clients has huge potential. This also includes corporates who have large employee bases. It benefits the insurers and their clients and it certainly benefits corporates and their healthy employees. Vitality Group now has 1.7 million members. Could this become the biggest healthcare membership in the world? The product certainly has the potential.

Ping An Health has been a slow process but the growth coming through in this last six months is very encouraging. Membership grew by 60%, and the business finally made a decent profit of R36 million. Within this joint venture, there are over 3 million people on the rewards program. They have a great partner in a tough country to crack. The potential here is huge.

These numbers represent good progress in the Discovery story. So many of the goals are becoming realities. We are very happy shareholders and clients of Discovery. This must be the only insurer on the planet that actually has happy clients!