Discovery and Generali Group Partnership is Good News for Discovery Investors
By Marcello Conti
Last month, South African insurer Discovery entered into a European partnership with the Generali Group, a leading insurance company in Italy and a major player worldwide with a total premium income of 66 billion euro in 2013, to launch the innovative Health and Protection shared value insurance products “Vitality. Vitality is the flagship behavior-linked shared value insurance model designed by Discovery and focused on “making people healthier” through personalized and regular interaction with the customer to encourage and reward healthy behavior. The wellness program of Discovery is the one of the most important product platforms in the medical aid industry and is offered by discovery with more than 5.5 million members in six markets (South Africa, United Kingdom, Singapore, US, China and Australia).
The Generali strategy is therefore to introduce a new insurance instrument with proven success relying on the experience and know-how of Discovery. There are huge potentila benefits for Discovery as this offers an opportunity to expand its markets, liverage on its expertise, increase revenue and returns to its investors. After the announcement (18 nov) discovery shares (JSE Code: DSY) opened at a price of R106.93/share, and on December 11th 2014, the share closed at R108.40, confirming an important growth. In the last year DSY has gained +43%, in fact on December 2013 was trading at 78/share Rands and currently trading at over R108 per share. However the “Vitality” partnership with Generali is discovery’s second move in the European insurance market. On November the 10th, the Company acquired the remaining 25% of its Uk joint venture, PruHealth and PruProtect for £155 million and will now own 100% of the Uk operations valued at £620 million. Taking full ownership of the Uk operations, now rebranded under a single insurance brand: Vitality, is a tremendously milestone for Discovery becuase of the significance of the European market, especially the UK, and is key to replicate Discovery’s shared-value insurance model. Strategically, the Uk market presents a significant opportunity: the Uk protection market is the third-largest globally and the combination of high level of underinsurance and low retention rates among insurers, provides an optimal platform for the Company that now has set its financial goal for the joint venture: to target £1 billion of earned premiums and £200 million of new business over the next five years. In a difficult economic environment, Discovery’s business model and strategy continue to deliver positive results, in fact the past financial year marked a period of strong performance for the company that posted normalised profit from operations of R4 976 million, a 23% increase from the previous year, a figure driven strongly by new business growth of 15% to R12 196 million.
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