With R250bn API targeted, China’s Ping An may be a “TenCent” for 25% owner Discovery

Discovery's visionary co-founder and CEO Adrian Gore downplays the mere suggestion. But the hyper growth being posted by its Chinese partner Ping An offers some parallels to Naspers' enterprise transforming investment in internet giant TenCent. Ping An is already generating over R25bn in annual premium income through providing health insurance on 16m lives, and its management is now targeting R250bn in API. While it carries the most potential, Ping An is only part of Discovery's globalising of the Shared Value philosophy upon which its proven business model is built. With a setback in the UK dropping the share price back to 2014 levels, the obvious question is whether Mr Market has overdone the Vitality Life. I caught up with Gore this afternoon for a private session after he'd presented interim results to investment analysts. – Alec Hogg

I'm Alec Hogg and this is a rational perspective. I spent most of the morning listening to Adrian Gore give a presentation to investment analysts on the half year results for Discovery (to the end of December). Discovery's share price has come under a lot of pressure, when the trading update told us that the operating profit for the half year was going to be lower than it was in the comparable period – the year before. The share price is now sitting at around R107 a share and it's instructive to note that Discovery broke through R100 a share in 2014. So in effect, what you're buying today, is the same price that you could have got Discovery in 2014. What has happened in the 6 years since – to this effect of multinational today – is chalk and cheese. But that's the way Mr. Market is valuing it at the moment. I think very differently, even more so after listening to the results presentation today and having had this conversation with Adrian Gore which follows. Just by way of context, the problem child in the group for this six month period – and in fact it's going to be for the full year – is Vitality Life Insurance. It's the insurance arm of the UK operation which until recently, was run as two different units. The Vitality health unit run by Neville Koopowitz and the Vitality life Insurance arm which was run by Herschel Mayers, who was also looking after the South African arm, so he had a lot on his plate. He's recently retired due to ill health and we wish him well after the incredible job that he's done in building up the life arm. However, those two operations now on Herschel's retirement have been pulled into a single operation and that company under Neville Koopowitz – as you'll hear later in the interview – is starting to unlock quite a lot of value as you might imagine would happen bringing two separate silos together. The key thing about all of this is that Vitality Life Insurance is the laggard on the results for the 6 month period. It's an accounting loss that was achieved. It's not a cash loss, it is a re-evaluation of the business on a market to market basis, due to historically low interest rates in the UK. Someone like Warren Buffett would look at this and say show me the money. Is there any difference to the money? So what are we getting so excited about? Of course Mr. Market thinks very differently and as a result of that, we have the Discovery share price down at levels that were last seen in 2014. Have a listen to the interview with Adrian Gore – the Founder and Chief Executive of Discovery – I asked Adrian if there were parallels between Discovery's experience in China with Ping An and Naspers experience in China with TenCent. Ping An has gone from nowhere to 10bn Renminbi or R25bn – in premium income in a very short period of time – and the managers are now aiming for 100bn Renminbi in premium income. What TenCent has done for Naspers shareholders, who knows, Ping An could be doing for Discovery shareholders into the future. But don't take my word for it, have a listen to this discussion and make up your own mind.

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