Hylton Kallner on Discovery results, Discovery Bank, Vitality, Ping An; shared-value delivers growth – CEO insights

Discovery is held in the BizNews share portfolio. Last week, the group reported on its results for the second half of 2020, with headline earnings per share decreasing by 10%. The share price fell a little and was trading at around R141 by the end of the week. Joining BizNews to pick up on the highlights and how Discovery has benefitted from investments in the UK and China and its shared value model is Hylton Kallner, CEO of Discovery Bank and chair of the Discovery South Africa Exco. – Jackie Cameron

Hylton Kallner on Discovery results:

I think the results reflect an incredibly robust operating performance across the group, with normalised operating profit up 19% to just over R4.5bn. I think, from our perspective, that’s really pleasing for a six month period, through the Covid pandemic – particularly compared to a six month period, which was prior to Covid. So a very robust operating performance. The model itself – at a group level – is performing well.

Our shared-value model around our purpose of making people healthier has never been more relevant. That’s really what’s driving a lot of the business. You’ll see in the results that there’s a very strong underpin, in terms of both capital and liquidity. So, we’re quite pleased with that. Thirdly, the focus on our emerging and growth businesses is really starting to come through – and that is, I think, a feature of the results.

Particularly our Vitality group offshore – the UK business – has performed exceptionally well. Our Discovery Insure business, locally, is really coming through. Our emerging businesses have performed well and we’ve been investing for the future. Notwithstanding the challenges and the complexities of Covid – which has made it a very complex period – [it’s been] a very pleasing period from our perspective.

On Vitality growth in the UK:

I think the UK business is really starting to look like the South African business, in terms of the composite model. The entire business is really built on the Vitality behavioural chassis, that I think resonates incredibly well in the current environment around making people healthier. From a client perspective, the model itself and focusing on health and resilience from a physical perspective, is incredibly relevant.

The complexities around low interest rates – which have been headwinds in the past in the life insurance business in the UK – have been mitigated to a large extent. That’s a feature of the results and we’ve seen a strong turnaround in that space and very strong growth in our Vitality Invest business.

On Ping An Health:

Ping An Health is a really exciting business. You’ll see that the growth there has really been remarkable. The revenue base is now substantial, in terms of the scale of the Ping An Health business – at over R18bn – that grew by over 60%, in terms of gross written premiums. New business itself, off a massive base, grew 31% to over R7bn for the total business.

It’s now a part of the Ping An Health Group, which falls under the Good Doctor operation. That has over 370 million users that are registered on that platform and growing incredibly strongly They’re a fantastic partner. The business is really growing strongly and we’re very pleased with that.

On Discovery Bank:

It’s been a very good period for Discovery Bank. It’s only really been operating for just over a year now. Over that period, deposits have grown to over R6bn, the advanced nearly R4bn in lending to our clients. We’re offering a full service – a full suite of products, from basic transaction accounts, full credit and transaction suite facilities to our clients.

When you look at the base – at nearly 300,000 clients and nearly 600,000 accounts on the bank platform – while it’s growing strongly and and it’s an incredibly good client base from a risk perspective, the opportunity to scale is really substantial. We see the growth trajectory of Discovery Bank as being something that holds a lot of opportunity for us, notwithstanding the fact that it is growing well and has had a very good period.

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