SA’s Discovery profit rises, US unit struggles

JOHANNESBURG – South Africa’s top health insurer Discovery Holdings lifted diluted headline earnings per share by 34 per cent and surprised investors with a maiden dividend, but its US unit continued to struggle.

The main driver to earnings growth was Discovery’s life insurance division which exceeded expectations, while growth at its UK unit also stood out, the group said yesterday. Diluted headline EPS before the impact of a black economic empowerment (BEE) transaction rose to 126,4 cents for the financial year to end-June, the company said in a statement.The company, majority-owned by financial and banking group FirstRand, declared its first dividend of 27 South African cents per share, reflecting a stronger cash position.”I didn’t expect the dividend at this point, it was a bit of a surprise,” said Jan Meintjes, a fund manager at Gryphon Asset Management, who follows Discovery closely.”This is a solid set of results, but obviously the US unit performance is disappointing.In the past couple of years it has not lived up to expectations, and I don’t believe it can be a quick turnaround so the market will remain concerned on that.”The company has not issued a dividend before in order to pursue its goal of organic expansion without recourse to raising debt from external sources, but said even with a wide array of expansion initiatives planned, it had sufficient cash to pay for these as well as the dividend.Discovery said PruHealth, its UK joint venture with insurer Prudential, had seen a jump of 705 per cent in new business to 282 million rand, with 58 912 members covered.But its US unit Destiny Health continued to struggle, widening its loss by 68 per cent to 151 million rand.It said it had appointed Arthur Carlos to the post of president and CEO of its Chicago-based Destiny Health.Discovery also said Destiny Health had expansion plans.Nampa-ReutersDiluted headline EPS before the impact of a black economic empowerment (BEE) transaction rose to 126,4 cents for the financial year to end-June, the company said in a statement.The company, majority-owned by financial and banking group FirstRand, declared its first dividend of 27 South African cents per share, reflecting a stronger cash position.”I didn’t expect the dividend at this point, it was a bit of a surprise,” said Jan Meintjes, a fund manager at Gryphon Asset Management, who follows Discovery closely.”This is a solid set of results, but obviously the US unit performance is disappointing.In the past couple of years it has not lived up to expectations, and I don’t believe it can be a quick turnaround so the market will remain concerned on that.”The company has not issued a dividend before in order to pursue its goal of organic expansion without recourse to raising debt from external sources, but said even with a wide array of expansion initiatives planned, it had sufficient cash to pay for these as well as the dividend.Discovery said PruHealth, its UK joint venture with insurer Prudential, had seen a jump of 705 per cent in new business to 282 million rand, with 58 912 members covered.But its US unit Destiny Health continued to struggle, widening its loss by 68 per cent to 151 million rand.It said it had appointed Arthur Carlos to the post of president and CEO of its Chicago-based Destiny Health.Discovery also said Destiny Health had expansion plans.Nampa-Reuters