Discovery and Cathie Wood’s ARK Invest align; Ping An central to growth strategy – Adrian Gore
Founder of Discovery Adrian Gore gives an in-depth insight to the growth avenues the insurance giant is pursuing. Its core business units remain Discovery Health and Discovery Insure, but the business is leveraging its loyal client base to expand into other avenues of growth. Discovery Bank, although currently loss-making, is growing rapidly. The bank's performance will be monitored closely by investors, given that the majority of expansionary capital expenditure is going towards building that business unit. Cathie Wood's ARK Invest recently invested more than R600m into Discovery, with Gore outlining the alignment in strategy with regard to technological advancements in each business unit's models to create increased efficiencies. Gore says Ping An, of which Discovery has a 25% stake, is still central to its growth strategy despite ominous signals by the regulatory authorities in China. – Justin Rowe-Roberts
Adrian Gore on whether it's leveraging its loyal customer base into other growth avenues
That answer must be an unequivocal yes. We have a fantastically loyal client base but the mechanism of the shared value of getting people engaged in behavioural change and through Vitality has created a repeatable model. So, your observation I think is right. We're not a conglomerate that has grown into adjacency, we have a central model that's repeatable to different environments. And the bank, as you point out, is a great example of that. So I strongly agree.
On how to deliver growth in the core operation units, Discovery Health and Discovery Life
Discovery Health and the Discovery Health medical scheme are big; it has a 58% market share. It can continue to grow and we've seen that amazingly during this period with a 29% increase in the new business. During Covid-19, there was a flight to quality, and that is what we've experienced. So, I believe we can grow. The fundamental issue on our model using Vitality is getting prices down if you manage your health well. In fact, we are trying to offer price points that are cheaper and better value for money; we are trying to do the opposite. We want to offer value for money through better behaviour. Even on the banking side, better rates of interest if you manage your money well. It should not be an expensive product. That is how we have managed to achieve market share.
On Discovery Bank's performance and prospects
The bank's performance over the period has been staggering, across every single variable, but probably the most notable are client acquisition and the engagement clients are getting at the bank. They really like what they are using. I think if we can continue to do that, it will grow. The banking space in South Africa is very big. We see that. We are [signing up] 700 to 800 clients a day, which is bigger than any of our other business lines. For us, not only should it be a powerful bank in and of itself, but it's a sort of composite maker as we've called it. All the other products sit in it and around it. It can be the central piece of the South African business.
On whether Ping An Insurance is still a part of the company's future plans
It certainly is. I mean, if you look at the spend on healthcare in China and the emerging middle-class, healthcare is in its nascent phase, so healthcare spend is likely to grow at a rapid rate. It is a central piece of how we are moving ahead. The truth in China, from our perspective, is there has been a pretty predictable regulatory environment. The crackdown has been on tech companies and some of the other areas that its government sees as abusive or whatever. In our case, there is a very careful, deliberate strategy for promoting the private health insurance market. It's a very important part of our future and we are very pleased with our work with Ping An.
On ARK Invest's R600m investment into Discovery
I was aware of it. I've met Cathy (Wood) in a Zoom call. I tried to get across in the presentation this morning that we need to be bold in this leadership position, the ability to predict illness and to change behaviour. And to the extent that it is part of our tech, which is consistent with Cathy's thinking and that of her team. That is the magic. We have got to develop our model faster and better. We are doing well but there is more to be done.
Read also: