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Discovery scraps dividend, flags possible capital raise

The company, which ties premium rates to its clients’ lifestyles, has not paid a dividend since the Covid-19 pandemic took hold last year.
Image: Supplied

South African insurer Discovery scrapped its annual dividend again on Thursday and said it may have to raise equity capital to cover costs linked to its investment in China’s Ping An, sending its shares down 8%.

The company, which ties premium rates to its clients’ lifestyles, has not paid a dividend since the Covid-19 pandemic took hold last year and said ongoing uncertainty over the impact of the virus meant it would continue to withhold payments for now.

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Its growth-driving partnership with Ping An, meanwhile, would require R1.5 billion ($104 million) more capital from Discovery to meet regulatory requirements.

Chief Executive Adrian Gore said it would likely seek to fund this via an equity raise, not debt, with the proceeds ring-fenced for this purpose.

On dividends, he said the insurer had never been a big dividend payer, preferring to invest capital in growth, and there was still uncertainty around the impact of Covid-19.

“We don’t believe as an insurer facing mortality claims we know fully the playout,” he told Reuters in an interview, adding the restoration of dividends would be reviewed on an ongoing basis.

Discovery had already flagged a more than tenfold rise in headline earnings per share (HEPS) – the main profit measure in South Africa to 454.7 cents, compared to 45 cents a year earlier.

The main driver of the rise was the impact of changes in its economic assumptions. On a normalised basis its HEPS fell by 9% to 518.7 cents, compared to 570.7 cents last year.

Discovery also said it would make Covid-19 vaccination compulsory for its employees from January.

Gore said that employees who decline could be dismissed after a lengthy process to establish whether an accommodation needs to be made for, for instance, religious beliefs.

“If … not, and you just don’t believe in vaccines, then you can’t work at Discovery,” he said.

The insurer will also give vaccinated new clients better premiums. Existing members will be given incentives via its rewards programme Vitality, which awards members points for desirable behaviour that can get them benefits ranging from cheaper insurance to free coffees, Gore said.

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DSY experiencing Pulmonary embolism?

Crap Medical aid… thank God I bailed out.
Though I have traded DSY and made cash to pay for my current medical aid.

Which one did you choose?

Medshield Medical Scheme.
A friend worked at this place and told me about it in 2013.
I signed up. Avoided the broker fee cos I knew what I wanted.
Try as much to avoid a broker.

Quick Signup
Claims are superfast.
No issues so far.
No vitality games and points stories.

Discovery works with brokers… so you pay these people for doing nothing over and above paying discovery.

Commission on medical aid is governed by the Medical Schemes act and currently sits at 3% of premiums capped at a certain amount. So this is not something you can avoid, it is legislated. If you not dealing with a broker who is being paid this comm, then someone, somewhere is receiving it.

Also all medical aid schemes need to cover PMB’s, so always surprised when guys start claiming others are better, they generally all the same and similar pricing. What Discovery has going for it is the huge reserve ratio, which is well above the minimum required of 25%.

“said ongoing uncertainty over the impact of the virus”

Funny, just like gov entities punting COVID indefinitely as convenient scapegoat for what goes…

How about subletting from that space age corporate headwaters?? Hahaah

I thought there’d be dividends, with Discovery’s cut of the Pfizer shots…………..?????????

I don’t think you understand how medical aids work.

Just last night a few friends and I discussed DSY as a possible investment. One was adamant he’s buying today, I on the other hand wasn’t too sure since he was basing his decision on “old information” on the HEPS announcement.

Just spoke to him, he took my view to heart and didn’t buy…

Probably because my partner shifted down to Coastal Saver from Classic Comprehensive saving R3546 per month.

Yeah, I am sure that is what did it. You are the main character.

You know that the dividend does not come from the non profit medical aid fund right? It comes from admin fees and other activities. Your switch to another option has no impact.

End of comments.

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