Discovery issues profit warning, cuts dividend as it sets aside R3.3bn for Covid-19 provisions

By Roxanne Henderson

(Bloomberg) – Discovery shares fell the most in two months after South Africa's largest medical-insurance administrator said full-year profit will drop because of provisions related to the coronavirus pandemic.

Normalized earnings per share for the 12 months through June is expected to decline by 20% to 30% compared with a year earlier, the Johannesburg-based company said on Monday. Discovery, which also owns an insurer, money manager and a rewards program, won't be paying a dividend as it set aside R3.3bn ($191m) for potential claims and policy lapses.

"The operating environment is complex and volatile and scenarios going forward may be worse than expected, in which case the group's growth would be lower than expected," Discovery said in a statement.

"The group is confident that it maintains sufficient liquidity and solvency to weather uncertain conditions."

The stock tumbled as much as 6.8%, the biggest decline since April 16, before paring losses to trade 2.5% lower than its previous close by 12:20pm in Johannesburg. It was the worst performer in the five-member South African life insurance index, which was down 2.3%.