The new Discovery head office in Sandton. Picture: MASI LOSI
The new Discovery head office in Sandton. Picture: MASI LOSI

SA’s largest private health insurer, Discovery, kept its interim dividend for its half-year to end-December unchanged at 101c, reporting a double-digit profit fall as it grapples with historically low interest rates in the UK.

The group’s Vitality Life business had swung into a loss after it implemented an interest-rate hedge structure to mitigate exposure to further lowering of UK interest rates.

Group profit fell 11% to R2.07bn, but Discovery said its established business delivered a “robust performance”, growing profits 3% to R4.3bn.

Group normalised profit from operations fell 7% to R3.5bn, with normalised profit at Vitality Life plunging 145% to a loss of R134m.

Discovery has said previously that low UK interest rates were weighing on its business there, with Vitality Life re-engineering itself for that environment with all new business repriced and with changes to its business mix.

The company said in November the “risk of a further decline in interest rates is beyond our risk appetite”, noting that UK’s long-term interest rates decreased to their lowest level on record during October 2019.

Discovery on Thursday also reported that its new banking offering, Discovery Bank, had 78,000 clients and 180,000 accounts as of February 18.

Deposits had grown to R1.2bn, with Discovery saying this would be its dominant investment going forward.

In morning trade on Thursday, Discovery’s share price had risen 4.17% to R112.30, having fallen 6.91% so far in 2020.

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