Discovery makes R3.3bn provision for Covid-19 fallout
The group expects it will need the amount for claims and policy lapses as Covid-19 hits SA’s economy
Health insurer Discovery says it is putting aside R3.3bn and will be holding onto dividends as it braces for the fallout from Covid-19 in coming years.
SA’s largest private health insurer, which has a market capitalisation of about R68bn, said in a trading update its Covid-19 provision had been calculated to estimate the future mortality, morbidity and economic effects of the pandemic by estimating excess mortality and excess lapses expected to arise in 2021 and 2022.
Two thirds of the expected effects are from mortality and morbidity effects, and a third economic. Lapses refer to policies ceasing due to lack of payment.
“Due to the uncertain and potentially volatile economic environment caused by the Covid-19 pandemic, Discovery will not be recommending the payment of ordinary dividends,” the group said.
The group noted that the situation remained volatile, and it would be both updating its modelling, and considering the reintroduction of dividends “when appropriate”.
Discovery said on Monday that normalised profit from operations, before providing for potential future Covid-19 effects for the year to end-June, was expected to be between 5% and 15% higher than the prior comparative period. This includes the results of Discovery Bank.
Normalised profit from operations is expected to be between 18% and 28% lower than the prior year, after including the potential future Covid-19 effects, the group said.
In morning trade on Monday Discovery's share price was down 5.07% to R103, putting it on track for its worst one-day loss in about two months. The group's share price has fallen 14.61% so far in 2020.
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