Discovery says pandemic was much more severe in SA than UK, but expects increased profit

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Discovery's head office in Sandton.
Discovery's head office in Sandton.

Despite a surge in death claims due to Covid-19 in its life insurance business, Discovery expects an increase of between 900% and 920% in its headline profit for the year to end-June.

Its "normalised" profit from operations – which excludes the impact of some technical distortions - is expected to increase between 5% and 10% for the year under review, the company said in a trading update.

The impact of Covid-19 on Discovery Life came to R2.4 billion in the past year, compared to R1.1 billion in the previous year, and headline profit for this business more than halved in the past year.

Other businesses fared better, with Discovery Health growing its earnings by 5% to 10%.   

Across the group, new business annual premium income increased by 11%, while retention levels across the group were "excellent" and better than expected.

Its VitalityLife business in the UK also performed also better than expected in terms of mortality and lapses and a relatively immaterial additional provision is deemed necessary to cover the potential effects of a possible fourth wave in the UK.

The unit is expected to report a 335% to 340% increase in its normalised profit, which is a reversal of a loss in the prior year loss.

"On a risk adjusted basis, we believe that the South African epidemic has turned out to be significantly more severe than the epidemic in the UK. In the UK, the extended lockdowns caused by the second and third wave of infections did however cause further delays to elective medical procedures," the company said in a statement.

Discovery expects to report its full year 2021 results on 2 September. Following the trading update, an initial rally petered out by mid-morning, leaving its share price flat at R128.73. 

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