Discovery reports deaths of nearly 5,000 members linked to Covid

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Financial services group Discovery says it expects operating profit to increase 17% to 21% for the six months ended December 2020 compared to the same period a year ago.

However, higher average interest rates in South Africa (SA) and a strong rally in the rand had a significant impact on the comprehensive income, which is expected to decline by 8% to 12% compared to the previous period. Normalized global profits are expected to fluctuate between -3% and + 1% when the group releases its financial results on Thursday, February 25.

“The period under review has been complex, dominated by the Covid-19 pandemic with corresponding economic uncertainty, market volatility and societal needs,” Discovery said in a statement released Tuesday, February 23.

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The group said it had suffered the deaths of nearly 5,000 members linked to Covid.

Discovery manages 39% of the total membership medical plans in South Africa, including Discovery Health Medical Scheme (DHMS) – South Africa’s largest open medical plan, with a 57% share of the open medical plan.

Daily Covid-19 infections in South Africa continue to decline, with 792 new cases recorded on Monday.

Health Minister Dr Zweli Mkhize expressed his condolences to the families of the 97 people who have lost their lives due to the coronavirus in the past 24 hours.

That brought the death toll to 49,150, while the cumulative number of cases has peaked at 1,504,588 since the outbreak.

Discovery’s operational performance for the six-month period ended December 2020 can be summarized by the expected growth in normalized profit from the following operations:

  • Discovery Health 4% to 8%
  • Discovery Life 1% to 5%
  • Discovery Invest -5% to -1%
  • Discovery Insures 41% to 45%
  • VitalityHealth 22% to 26%
  • VitalityLife> 200%
  • VitalityGroup> 100%
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Discovery said the average effective interest rates used to value assets under insurance contracts in South Africa have increased significantly in the last six months of its previous full year.

These average effective rates continued to rise, including real rates, and their impact continued, reducing the value of assets under insurance contracts by R 490 million (before tax), net of discretionary margins.

This had a marked effect on overall profit growth, with the comparative six-month period leading up to this interest rate hike, he said.

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He said that with the strengthening rand, the impact over the period under review included foreign exchange losses of Rand 360 million (pre-tax) on the translation of assets into foreign currencies and a fair value loss of 10 million rand (before tax) on currency hedging.

Discovery said it expects basic earnings per share and HEPS for the six months ended December 2020 to decline 5% to 15%.

Normalized basic net income per share is expected to be between -5% and 5% between 334.5 cents and 369.7 cents during the prior period.


Read: Half of South Africans probably had Covid-19: Discovery CEO

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