CEO Adrian Gore addresses the media and analysts regarding Discovery's results in Sandton, Johannesburg, on Tuesday. Picture: MARTIN RHODES
CEO Adrian Gore addresses the media and analysts regarding Discovery's results in Sandton, Johannesburg, on Tuesday. Picture: MARTIN RHODES

HEALTH insurer Discovery’s normalised headline earnings were up 20% to R2.8bn for the year ended June 30. However, its headline earnings declined 3% to R2.1bn over the same period.

Discovery CEO Adrian Gore told analysts on Tuesday this "paradox" had to do with how well its UK business, Prudential, performed.

When Discovery increased its stake in Prudential from 50% to 75%, the parties agreed that Prudential, as the minority shareholder, would have a "put" option to sell its share to Discovery from 2015.

In terms of accounting standards, Discovery has to include that 25% put option as a liability.

Given the rapid growth in the UK business, Discovery had to revalue the 25% stake at about R3.4bn, Mr Gore said.

Discovery’s UK joint ventures in PruHealth and PruProtect performed "staggeringly" well, according to Mr Gore. Profits increased 57% to R472m and new business grew 48% to R1.6bn.

The discrepancy between headline earnings and normalised headline earnings also had to do with a substantial cash amount of R2.34bn that Discovery had been sitting on, said Mr Gore.

The group has moved the cash into recapturing reinsurance financing, which will give better yields.

Discovery has declared a full-year dividend per share of 124.5 cents.

Mr Gore was upbeat about the group’s performance, saying new business had grown 15% to R10.8bn — beating the group’s 10-year average.

At the same time, the quality of the business had improved, with lapses and loss ratios both showing "positive trends", he said.

The share price rose 3.74% on the release of the results to R87.26 by 2.55pm on Tuesday.