Discovery reports 30% increase in normalised headline earnings after strong growth locally and overseas

Discovery produced another strong annual financial performance from its busineses and it lifted normalised headline earnings 30% to R9.78 billion.

The final dividend was raised 32% to 201 cents. The share price fell by 4.16% to R216.35 on the JSE on Thursday afternoon, but the price is 40% higher than at the same time last year, indicating investors may well have foreseen the good earnings growth. In the year to June 30, normalised operating profit increased 29% to R15.21bn. Return on equity rose to 15.4% from 13.5%.

There was strong growth in normalised profit from operations in both composites: Discovery South Africa delivered 22% growth and Vitality generated 70%. Group chief executive Adrian Gore said in a statement the all-round strong performance was generated in an environment of increased geo-political complexities and uncertainty around global policy shifts and trade tensions.

“The strong performance of Discovery South Africa highlights the contribution from each of our businesses. And in Vitality, the performance reflects the competitive dynamics of the Vitality Shared-value Insurance model, with excellent progress in restructuring the global operations into a single focused business over the past nine months,” he said.

“The acceleration of technological and demographic trends underpin the relevance of the Vitality Shared-value Insurance model and unique data. This positions Discovery uniquely for continued growth,” he said.

Discovery has emerged from a cycle of significant investment, which focused on creating new avenues for growth. This had positioned it for a new phase of scaled organic growth, with focused execution through its recently formed global composite, Vitality, and its home business, Discovery South Africa.

While new business growth was impacted in some businesses, the group had made a good start on the ambition for profit from operations to grow between 15% to 20% on a compound basis, over the next five years, from the end of 2024 to 2029.

Discovery South Africa increased normalised operating profit by 22% to R12.01bn. “Excellent levels of engagement,” drove strong claims experience and continued customer retention, said Gore.

Discovery Bank generated its first profitable period in the second half, ahead of plan. Discovery Health increased operating profit by 7% while continuing to invest in technology and artificial intelligence. Discovery Life's operating profit increased 14% to R5.53bn. Both the Individual Life (11%) and Corporate and Employee Benefits (71%) delivered "exceptional" claims performances.

Discovery Invest increased operating profit by 29%. Assets under management grew by 18% and assets under administration grew by 15%. Discovery Insure sustained its positive trajectory, with an operating profit of R739m.

Vitality’s normalised operating profit increased by 70% to R3.21bn. Vitality now covers 10.4 million lives outside of China, up 25% over the year, including more than two million customers in the UK.

At VitalityHealth, operating profit rose by 174% to £50.6m (173% to R1.19bn), driven by pricing actions, a stabilising claims environment and claims and expense management. VitalityLife’s operating profit recovered strongly, increasing 70% to £27.1m, with stable lapse and claims experience.

Vitality Network’s normalised operating profit increased by 7% to $30.5m. Membership increased by 27% to 6.7 million. The group’s share of Ping An Health Insurance after-tax operating profit increased by 7% to R1.21bn. At the Vitality Health International Other segment, losses improved by 25% to R291m, following lower losses in Vitality USA and the successful integration of WellSpark Health, a personalised coaching business acquired in November 2024.

“We are able to deliver measurable improvements in health outcomes, service delivery, and profitability through our unique model and dataset. In Discovery Bank, we recently introduced Discovery AI, and Vitality AI was launched as Personal Health Pathways in Discovery South Africa. These capabilities allow for a more precise understanding of health risks and hyper-personalised product experiences. So far, both Discovery AI and Vitality AI have driven excellent engagement,” said Gore.

“Overall, the strong performance of the focused composites makes us confident that we can achieve our established five-year ambition for growth in profit from operations,” he said.

BUSINESS REPORT