Gore denies short-term insurance plans

Johannesburg - Discovery Holdings [JSE:MSY], the R23bn JSE-listed life and healthcare insurance business, has no plans to enter the short-term insurance market in the near term, it said on Tuesday.
 
In an interview with Fin24, CEO Adrian Gore refuted a Moneyweb report that said talk of Discovery entering the short-term insurance market was "now running on overdrive".

The report included comment from industry heavyweights Willem Roos, the CEO of OUTSurance, and Ian Kirk, the CEO of JSE-listed Santam, on the merits of the new business.
 
"I am not sure where that story came from, but at the moment we have no plans to enter the short-term insurance market," said Gore.

"Our philosophy has always been to enter markets only where we believe we can add value."
 
Gore was speaking following the release of Discovery's interim results for the six months ended December 31 2010. The company reported a 25% increase in headline earnings to R941m, a 28% increase in normalised profit to R1.3bn and a 27% increase in dividend to 42 cents per share.
 
Analysts were also bemused by the speculation on short-term insurance.
 
Some argued that while it may make sense for the likes of OUTSurance to look at a direct channel model for life insurance, it was not as easy or viable to apply that to Discovery.
 
Entrance into the banking market has been an area of persistent speculation as a growth angle for Discovery. This is largely due to the strong growth that Discovery Card has enjoyed over the last few years.

Discovery is the fifth-largest operator of credit cards in South Africa with around 8% market share, and it is rapidly closing in on Nedbank Group [JSE:NED] which has about 12%.
 
Discovery is now adding a premium "purple" card to its product offering for high end clients.
 
Asked whether banking was next on the cards for Discovery, Gore said: "I see room for the financial services cluster to grow in time, but at the moment our focus is on items like Discovery Life, Health and Invest offerings. Again, we will only do something if we can add value."
 
Gore said that in his opinion, the South African insurance market still had plenty of opportunities for growth.

"People underrate the scale of the South African market," he said.
 
He was asked how South Africa was perceived as an investment destination, considering much of the negative publicity around onerous legislation and nationalisation threats by the government.
 
"I am actually very bullish on South Africa at the moment; there is absolutely no reason to be negative on the country right now and I think that was very evident at Davos this year," he said.

Gore did, however, caution that "valuations in emerging markets are pretty full at the moment" and he believed this view was shared by foreigners.
 
On the subject of emerging markets, Gore talked down the relationship with Chinese partner Ping An, which had been touted by industry experts as a major driver of growth for Discovery.
 
He described the transaction as "embryonic". Asked if this was a case of tempering shareholder expectation, Gore said: "These things take time and we need to be realistic about it. To think of it as a short-term boom would be unrealistic."
 
 - Fin24

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