Q4 2026 Discovery Ltd Earnings Call
Speaker #1: Good morning, and welcome. It is always a wonderful pleasure, and an honor, frankly, for me to present our results. The results this morning cover the full year to 30 June 2026, for our group, Discovery.
Adrian Gore: Good morning, and welcome. It is always a wonderful pleasure and an honor, frankly, for me to present our results. The results this morning are for the full year to 30 June 2026 of our Group Discovery. At the outset, it has been a really tremendous year. I wanted to thank our team, all of the Discovery people, Vitality people globally. It has been a remarkable year with a huge amount of work. I hope that comes through clearly in the presentation of the scale of what you have achieved. So thank you for that. Let me start by being clear. It has been a strong year. This is in fact the second year of our five-year cycle from 2025 to 2029 inclusive. It has been a strong year financially. You can see normalized profit up 17%, normalized headline earnings up 21%.
Speaker #1: At the outset, it's been a really tremendous year, and I want to just thank our team—all of the Discovery people, of Vitality, people globally.
Speaker #1: It's been a remarkable year with a huge amount of work, and I hope that comes through clearly in the presentation, in the scale of what you've achieved.
Speaker #1: So thank you for that. Let me start by being clear: it has been a strong year. This is, in fact, the second year of our five-year cycle, from 2025 to 2029 inclusive.
Speaker #1: It's been a strong year financially. You can see normalized profit up 17%, normalized headline earnings up 21%. But I think, hopefully more importantly, you'll see the strategy is embedded in the group, and the two composites I think are quite unique and powerful, and I think they are rolling out just in a few weeks' time.
Adrian Gore: But I think hopefully more importantly, you will see the strategies embedded in the group. The two composites, I think are quite unique and powerful, and in fact, are rolling out just in a few weeks' time. I hope you will see that through the presentation. Just to make the point, we have followed, I think, a very coherent strategy, in a very disciplined way based on our purpose of making people healthy and enhancing their lives. That has in fact intensified across the group through our model. We have navigated carefully an environment, a macro environment of considerable complexity, two really disruptive forces, AI, which I think you will see is kind of ubiquitous throughout the group, you can see that clearly, and kind of macro geopolitical rupture, creating some volatility, that creates complexity. But I think we have navigated that well.
Speaker #1: I hope you'll see that through the presentation. Just to make the point, we have followed, I think, a very coherent strategy in a very disciplined way.
Speaker #1: Based on our purpose of making people healthy and enhancing their lives—and that is, in fact, intensified across the group through our model—we have navigated carefully an environment and macro environment of considerable complexity, with really disruptive forces. AI, which I think you'll see is kind of ubiquitous throughout the group, and you'll see that clearly, and kind of macro geopolitical rupture creating some volatility.
Speaker #1: That creates complexity, but I think we've navigated that well. We've interpreted the trends that affect our industry, I think, appropriately, and evolved our business model in the appropriate way, as you can see, manifesting in two business composites: Discovery South Africa and Vitality globally.
Adrian Gore: We have interpreted the trends that affect our industry, I think appropriately, and evolved our business model, in the appropriate way, as you can see, manifesting in two business composites, Discovery South Africa and Vitality Global. Both are focused in their markets in the right way. I hope I make that clear to you. Then finally manifesting in a financial framework and a capital allocation methodology we believe is rational and appropriate given where the organization is at. The results have many different dimensions to them. I would like to show you three slices in a sense of what we have done over the year. The first is financial results and the framework. An organization that is growing strongly, generating cash, deleveraging, but building at the same time platforms for future growth.
Speaker #1: Both are focused on the markets in the right way, and I hope I've made that clear to you. And then finally, this manifests in a financial framework and a capital allocation methodology that we believe is rational and appropriate, given where the organization is at.
Speaker #1: The results have many different dimensions to them. I'd like to show you three slices, in a sense, of what we've done.
Speaker #1: Over the year, the first is financial results and the framework—an organization that's growing strongly, generating cash, deleveraging, but at the same time building platforms for future growth.
Speaker #1: Secondly, a focus on our Vitality shared value business model. Make it more, effective, focusing on the efficacy, its relevance, but making sure critically we can manage and demonstrate the effect on customers, which we call alpha, shareholders, we call alpha, customers, which we call ex, and I'll talk about that later, and the societal effect of the model.
Adrian Gore: Secondly, a focus on our Vitality shared value business model, make it more effective, focusing on efficacy, its relevance, but making sure critically we can manage and demonstrate the effect on customers, which we call alpha, shareholders we call alpha, customers which we call EX, and I will talk about that later, and the societal effect of the model. There has been considerable performance, development, and the ability to demonstrate very clearly. Then finally, I would like to take you through the business strategies, the two composites, Discovery, and Vitality, and illustrate carefully how both are focused carefully in their markets with the right strategy. Let me start with the financial results. You will have seen them at a high level. Just to make the point, we have, I think, a very disciplined financial framework and rational capital allocation process.
Speaker #1: There's been considerable performance, development, and the ability to demonstrate very, very clearly. And then finally, I'd like to take you through the business strategies.
Speaker #1: The two composites—Discovery and Vitality—illustrate carefully how both are focused in their markets with the right strategy. Let me start with the financial results.
Speaker #1: You will have seen them at a high level. Just to make the point, we have, I think, a very disciplined financial framework and rational capital allocation process. Where the business—where the group is at this point in time—is a high rate of growth, a high intrinsic rate of growth.
Adrian Gore: Where the group is at this point in time is a high rate of growth, a high intrinsic rate of growth. It focuses on growth, cash generation through a high conversion rate, and then a clear, rational approach to allocating capital between dividends to shareholders, leverage, and of course, investment in new initiatives. Finally, the result coming out of it is return on equity. Our focus is, of course, on growth and on cash conversion. You can see in the slide the framework that we gave, the intention that we tried to achieve over this 5-year cycle.
Speaker #1: So, focus is on growth, cash generation through a high conversion rate, and then a clear, rational approach to allocating capital between dividends to shareholders, leverage, and, of course, investment in new initiatives.
Speaker #1: And finally, the result coming out of it is return on equity. Our focus is, of course, on growth and on cash conversion, and you can see in the slide the framework that we gave, the, the intention that we tried to achieve over this five-year cycle: a growth corridor of 15 to 20%, a cash conversion ratio of 60 to 70%, a careful focus on new initiatives, not spending more than 5% on new initiatives, leverage in the 10 to 20% range, and importantly, dividend cover, 5 being a five times cover, bringing that down, over time, and an ROE going from 15%, climbing up higher over, over the over the period.
Adrian Gore: A growth corridor of 15% to 20%, a cash conversion ratio of 60% to 70%, a careful focus on new initiatives, not spending more than 5% on new initiatives, leverage in the 10% to 20% range, and importantly, dividend cover, it has been a 5 times cover, bringing that down over time. Then ROE, we are going from 15% climbing up higher over the period. The period under review, I think, has been remarkably strong. Firstly, just to talk to the actual macro environment, I made the point AI, you will see, is ubiquitous across the organization. The actual macro environment has been very complex, but one that I think we have managed well. There are a few themes and many, many moving parts.
Speaker #1: The period under review, I think, has been remarkably strong. I mean, firstly, just to talk to the actual macro environment—I made the point: AI, you will see, is ubiquitous across the organization. But the actual macro environment has been very complex, though one that I think we've managed well.
Speaker #1: There are a few themes—there are many, many moving parts. But to make the point: primarily, the rand appreciating created some pressure on our earnings because, of course, we report in rands, and our earnings in foreign currency come down. The effect of that is kind of a 2% reduction, and I'll talk more to that.
Adrian Gore: To make the point primarily, the rand appreciating created some pressure on our earnings because, of course, we report in rands, and our earnings in foreign currency come down. The effect of that is kind of a 2% reduction. I will talk more to that. The effect of long-term interest rates in South Africa coming down with inflation coming down has meant an appreciation of the present value of assets with store value. You will see that coming through. We had a reduction in the yen that affected our global business, and I will take you through that later. Generally, something I think we managed well. We have run our organization according to seven distinct risk principles, and I think they played out very well. I think we have managed the volatility well.
Speaker #1: the effect of, of long-term interest rates in South Africa coming down with inflation coming down has meant kind of an has, has meant an appreciation, of the present value of assets of store of value.
Speaker #1: You'll see that coming through. We had a reduction in the end that affected our global business, and I'll take you through that later. But generally, that's something I think we managed well.
Speaker #1: We've run our organization according to seven distinct risk principles, and I think that played out very well. I think we've managed the volatility well.
Speaker #1: The group is resilient, and I think different parts of the group, as they play out, illustrate that within reason. Despite volatility, the earnings growth is in line with what we expected to achieve.
Adrian Gore: The group is resilient, and I think different parts of the group, as they play out, illustrate that within reason, despite volatility, the earnings growth is in line with what we expected to achieve. Not a simple environment, but one that I think we have managed well. Get to your operating profit. First, you can see the operating profit grew 17% to just over ZAR 17.75 billion. I think that is a very strong growth. You can see graphically over the last number of years just how quickly the organization has grown. Again, to make the point, we are in the second year of this 5-year cycle. I think we are very pleased with how the organization has performed.
Speaker #1: So, not a simple environment, but one that I think we've managed well. So, getting to the operating profit: first, you can see the operating profit grew 17% to just over R17.75 billion.
Speaker #1: I think that's very strong growth. You can see graphically, over the last number of years, just how quickly the organization has grown. And again, to make the point, we're in the second year of this five-year cycle.
Speaker #1: I think we are very pleased with how the organization has performed. It's the first time, and I think it is a milestone that the, the operating profit has exceeded a billion US dollars, which is, which is a, which is an important milestone.
Adrian Gore: It is the first time, and I think it is a milestone that the operating profit has exceeded $1 billion, which is an important milestone, I think quite symbolic in a sense. If you look at the actual detail on the slide, it kind of illustrates the two composites. Discovery South Africa growing at 16% in the high end of the range. Vitality growing at 21%. It would have been 26% on a like-to-like currency basis, but very happy with that performance. The two together create the 17% growth of the group. If you cast your eye over the actual slide, you can see the South African composite performed remarkably well. Our big businesses, Discovery Health, Life, and Invest, all performing strongly. Excellent performance from Insure. You will see that later in the presentation.
Speaker #1: I think it's quite symbolic in a sense. If you look at the actual detail on the slide, it kind of illustrates the two composites: Discovery South Africa growing at 16%—at the high end of the range—and Vitality growing at 21%.
Speaker #1: It would have been 26% on a like-for-like currency basis, but we're very happy with that performance. The two together create the 17% growth of the group.
Speaker #1: If you cast your eye over the actual slide, you can see the South African composite performed remarkably well. Our big businesses—Discovery Health, Life, and Invest—all performed strongly, with excellent performance from Insurer.
Speaker #1: You'll see that later in the presentation. The bank really turning strongly to profitability and exceeding expectation, giving the 16% growth in total. Globally, the global business is broken up into the UK, Ping An, and Vitality Global Markets, and that now brings all of our focus outside of the UK into one business and outside of Ping An.
Adrian Gore: The bank really turning strongly to profitability and exceeding our expectation, giving the 16% growth in total. Globally, the global business is broken up into the UK, Ping An, and Vitality Global Markets. That now brings all of our focus outside of the UK into one business from the outside of Ping An. You can see the UK performed remarkably well. And really you will see in the presentation just how the model, the Vitality shared value model, has played out in that regard. Ping An also performed well. Again, the currency effect of all of these. Vitality Global Markets is a very important business. The yen appreciation over the period affected a contract asset in the Sumitomo Life, and given the size of the earnings, it did have the effect on earnings, but you will see how we are dealing with that going forward.
Speaker #1: You can see the UK performed remarkably well, and really you'll see in the presentation just how the model of Vitality, the shared value model, has played out in that regard.
Speaker #1: Ping On also performed well. Again, the currency effect of all of these. Vitality global markets is a very important business. The, the yen depreciation over the period affected a contract asset in Sumitomo Life, and given the size of the earnings, it did have that, it did have that effect on earnings, but you'll see how we, we are dealing with that, going forward.
Speaker #1: Bringing it all together, you can see how the earnings have played out. We invest considerably in Vitality and AI, and we're excited about what they can do. That's an important part of our strategy going forward.
Adrian Gore: Bring it all together, you can see how the earnings has played out. We are investing considerably in Vitality AI and excited about what it can do, and that is an important part of our strategy going forward. That is kind of a breakdown of the operating profit. You will see the detail in the presentation. On the new business side, new business of the insurance businesses grew by 6%. Of the non-insurance businesses, we look at total income growing by 10%. It is kind of a tale of a number of different cities. You can see South Africa, robust growth by 8%. The big business is growing, I think, very competently. You will see that in the presentation. Vitality UK had an exceptional period, 14% up. Ping An Health coming down 6%.
Speaker #1: So, that is kind of a breakdown of the operating profit. You'll see the detail in the presentation. On the new business side, new business of the insurance businesses grew by 6%.
Speaker #1: Of the non-insurance businesses, we look at total income growing by 10%. It's kind of a tale of a number of different cities. You can see South Africa with robust growth of 8%.
Speaker #1: The big businesses are growing, I think, very competently. You'll see that in the presentation. Vitality UK had an exceptional period, 14% up. Ping An Health coming down 6%.
Speaker #1: If you followed us at the interim period, we explained one of the big developments at the interim period was that Ping An Health lost the use of the Ping An Life distribution channel, which was in fact half of its channel at that point in time.
Adrian Gore: If you followed us at the interim period, we explained one of the big developments at the interim period was that Ping An Health lost the use of the Ping An Life distribution channel, which was in fact half of its channel at that point in time. We were expecting a bigger hit than 6%, but the team has done a remarkable job in terms of diversifying both product and distribution channels, and we are very happy with that result. On the non-insurance income, you can see bank grew by 31%. Health insurance products, Flexicare, gap cover grew 30%, which I think is remarkable. And Vitality Global Markets hit by the yen, declining 10%. You will see the detail a bit later in the presentation. The quality of the group, I think is demonstrated well in the embedded value.
Speaker #1: We were expecting a bigger hit than 6%, but the team has done a remarkable job in terms of diversifying both product and distribution channels.
Speaker #1: And I think we are very happy with that result. On the non-insurance income, you can see Bank grew by 31%. Health insurance products—FlexiCare, Gap Cover—grew 30%, which I think is remarkable.
Speaker #1: And Vitality Global markets were hit by the end, declining 10%. You'll see the detail of it later in the presentation. The quality of the group, I think, is demonstrated well in the embedded value.
Speaker #1: And I just bear in mind, the embedded value does not, does not cover many of the uncovered businesses, the bank, our global businesses, etc., but I think it provides a very good illustration of how the group is progressing.
Adrian Gore: Now, just bear in mind, the embedded value does not cover many of the uncovered businesses, the bank, our global businesses, et cetera. But I think it provides a very good illustration of how the group is progressing. The return on embedded value, 14.1%. The total growth in EV to ZAR 140, just under ZAR 143 billion, as you can see. But if you look at the actual components of the embedded value, I think it is very pleasing. The VIF grew up by 31%. The unwind of the discount rate, very strong, non-economic experience variances of a positive nature added over ZAR 2 billion, up 33% from the period illustrating the quality of the group and illustrating we are performing ahead of actuarial assumptions. Then interestingly, the profit from non-covered businesses from the bank and the other issues coming through very strongly.
Speaker #1: The return on embedded value is 14.1%. The total growth in EB is to just under R143 billion, as you can see. But if you look at the actual components of the embedded value, I think it's very pleasing.
Speaker #1: BNB, the BNB growth grew by 31%. The unwind of the discount rate, very strong non-economic experience variances of a positive nature, added over $2 billion, up 33% from the period, illustrating the quality of the group and illustrating we are performing ahead of actual assumptions.
Speaker #1: And then, interestingly, the profit from non-covered businesses, from the bank and the other issues, is coming through very strongly. So, the actual capital value and the equity value of these businesses is not in the EV, but you can see the profit comes through into shareholder value.
Adrian Gore: The actual capital value and the equity value of these businesses is not in the EV. But you can see the profit comes through into shareholder value. What is an interesting observation is, in fact, that profit is actually higher in quantum than the VNB. So it is actually adding more to the embedded value, and I think that is an important dynamic. You can see that creates an operational EV up to ZAR 146 billion. The effect of lower rates of interest added ZAR 6.3 billion to the embedded value. But the Forex effect merely kind of took out ZAR 4.8 billion. When you bring it all down, you get to the 14.1%. I think it is a good growth rate, but I think it illustrates the quality of how the group is evolving. The other important measure is just cash generation.
Speaker #1: And what's an interesting observation is, in fact, that profit is actually higher in Quantum than the BNB. So it's actually adding more to the embedded value.
Speaker #1: And I think that's an important dynamic. You can see that creates an operational EV up to $146 billion. The effect of lower rates of interest added $6.3 billion to the embedded value, but the forex effect nearly kind of took out $4.8 billion.
Speaker #1: When you bring it all down, you get to the 14.1%. I think it's a good growth rate, but I think it illustrates the quality of how the group is evolving.
Speaker #1: The other important measure is just cash generation. The operational cash flow was excellent over the period, up 26% to $11.3 billion. You can see that in the left-hand chart, that very, very strong growth.
Adrian Gore: The operational cash flow was excellent over the period, up 26% to just ZAR 11.3 billion. You can see that in the left-hand chart, that very, very strong growth. Importantly, you can see the cash conversion ratio far ahead of our expectation. We had our cash conversion ratio in the 60% to 70% area in our corridor around what we set out to achieve. You can see the cash conversion at 85%. You can see the ZAR 11.3 billion. We use that cash to pay dividends, finance costs. We repaid additional debt, leaving us with ZAR 3.6 billion of net cash flow over the period. The manifestation in terms of the group's capital position is very, very favorable. We are in a very strong capital position that makes us resilient, it gives us optionality, and I think that is important.
Speaker #1: Importantly, you can see the cash conversion ratio is far ahead of expectation. We had our cash conversion ratio in the 60% to 70% area, in our corridor, around what we set out to achieve.
Speaker #1: You can see the cash conversion at 85%. You can see the $11.3 billion. We used that cash to pay dividends and finance costs.
Speaker #1: We repaid additional debt, leaving us with $3.6 billion of net cash flow over the period. The manifestation, in terms of the group's capital position, is very, very favorable.
Speaker #1: We're in a very strong capital position. That makes us resilient. It gives us optionality, and I think that's important. You can see the strong cash conversion.
Adrian Gore: You can see the strong cash conversion, you can see that all of our entities are well-capitalized, and you can see the leverage is coming down nicely on a like-for-like basis. Leverage came down to 12.8% in the very low part of the range. We acquired our head office, and we did that by raising debt and acquiring the assets. So if you count that debt, it takes the leverage up to 15.4%. Even with that is a reduction. Bear in mind, the lease obligations was kind of the same risk anyway. So on a like-for-like basis, the 12.8%, I think, is important. But even if you add in the building, it does not do anything dramatic to the leverage ratio. Again, very much in line with where we would like to be. The effect of all of this can be seen on the face of the income statement.
Speaker #1: You can see that all of our entities are well capitalized, and you can see the leverage is coming down nicely on a like-for-like basis.
Speaker #1: Leverage came down to 12.8%, in the very low part of the range. We are quite ahead of ourselves, and we did that by raising debt and acquiring the assets.
Speaker #1: So if you count their debt, it adds—it takes the leverage up to 15.4%. Even with that, it's a reduction. And bear in mind, the lease obligations were kind of the same risk anyway.
Speaker #1: So, on a like-for-like basis, the 12.8, I think, is important, but even if you add in the building, it does not do anything dramatic to the leverage ratio.
Speaker #1: Again, very much in line with where we'd like to be. The effect of all of this can be seen on the face of the income statement.
Speaker #1: I'm going to make just a few basic comments about how the gearing works, because I think as a group grows, just at an intellectual level, we'd like to see the bottom line grow faster, because for finance costs, they're hopefully stable or going down.
Adrian Gore: I'm going to make just a few basic comments about how the gearing works, because I think as the group grows, just on an intellectual level, we'd like to see the bottom line grow faster because the finance costs are hopefully stable or going down. You see the effect of that. Operating profit up 17%. You can see the finance costs have come down on account of two things. One is a lower cost of financing. I think our team did a great job in optimizing the debt structures. In addition, we reduced debt. We've paid down, I think, ZAR 3 billion of debt over the last year. So you see that coming through. The other is just the accounting treatment of the lease termination. There's an asymmetry between the asset, use of the building asset, and the actual obligation of the lease.
Speaker #1: And you see the effect of that. Operating profit is up 17%. You can see the finance costs have come down on account of two things.
Speaker #1: One is a lower cost of financing. I think our team did a great job in optimizing the debt structures. But in addition, we reduced debt.
Speaker #1: We've paid down, I think, $3 billion of debt over the last, over the last two years. You see that coming through. The other is just the accounting treatment of the lease termination, kind of as an asymmetry between the asset use—use of the building asset—and the actual obligation of the lease.
Speaker #1: That throws out a once-off release of $1.463 billion, as you can see. And then the sale of our CMT asset parcel sale added a further $211 million.
Adrian Gore: That throws out a once-off release of ZAR 1.463 billion, as you can see. The sale of our CNT asset parcel sale added a further ZAR 211 million. When you bring it all together, you can see profit before tax up 35%, as opposed to the 17% profit from operations. The effective tax rate slightly down, being profit after tax up 38%. When you add all the headline earnings adjusted, you get headline earnings up 34%. When you make the adjustments to normalize headline earnings, for example, taking off that once-off lease termination, normalized headline earnings up 21%. So really, I think the recon is really the normalized profit from operations at 17% and normalized headline earnings up 21%, as I said at the outset of the presentation.
Speaker #1: When you bring it all together, you can see profit before tax up 35%, as opposed to the 17% profit from operations. The effect of tax rates is slightly down, bringing profit after tax up 38%.
Speaker #1: When you add all the headline earnings adjusters, you get headline earnings up 34%. When you make the adjustments to normalize headline earnings, for example, taking off that once-off lease termination, normalized headline earnings are up 21%.
Speaker #1: So really, I think the recon is really the normalized profit from operations, up 17%, and normalized headline earnings, up 21%. As I said at the outset of the presentation.
Speaker #1: Given the scale of the group, the cash generation, and the strength of the group, we have made the decision to drop the dividend cover from 5 down to 4.5.
Adrian Gore: Given the scale of the group, given the cash generation and the strength of the group, we have made the decision to drop the dividend cover from five down to 4.5, and therefore, the dividend payable is simply a mathematical derivation of that. Total earnings divided by 4.5, minus the interim dividend. That throws out a dividend of 273 cents per share, final dividend, which is a 36% growth. The full-year dividend, adding interim, is 384. Total dividend is 384 cents per share, a 33% growth. If you add it together, you'll find it's a total of a 4.5 times dividend cover. So we're very pleased that the dividend growth illustrates the strength of the group and the strength of the cash generation of the group.
Speaker #1: And therefore, the dividend payable is simply a mathematical derivation of that: total earnings divided by 4.5, minus the interim dividend.
Speaker #1: That throws out a dividend of 273 cents per share, a final dividend, which is a 36% growth. And the full-year dividend, adding the interim, is 384 cents per share.
Speaker #1: Total dividend is 384 cents per share, a 33% growth. If you add it together, you'll find it's a total of a 4.5 times dividend cover.
Speaker #1: So, we're very pleased that the dividend growth illustrates the strength of the group and the strength of the cash generation of the group.
Speaker #1: So, in summary, from the financial results—as I said at the outset—I think the model we're using is absolutely appropriate, given where the group is at.
Adrian Gore: In summary, from the financial results, as I said at the outset, I think the model we're using is absolutely appropriate given where the group is at. The priority is on growth and cash conversion, and then a very rational allocation of capital. You can see in the table the targets we set, just transposing that model into a vertical table. You can see the targets that we set in the five-year plan. In 2025, I think we performed remarkably well. A lot faster growth than we expected, but you can see all the other metrics in 2025 are very much in line and directionally correct. In 2026, an excellent performance. The profit inside, almost mid-range of the target. Cash conversion dramatically better. Spend on new, lower. FLR coming down quite substantially. Dividend cover now coming down.
Speaker #1: The priorities are on growth and cash conversion, and then a very rational allocation of capital. You can see in the table the targets we've set, just transposing that model into a vertical table.
Speaker #1: You can see the targets that we set in the five-year plan. FY25, I think we performed remarkably well—a lot faster growth than we expected. But you can see all the other metrics in '25 very much in line.
Speaker #1: And directionally correct. In F26, an excellent performance. The profit in, inside almost mid-range of the target. Cash conversion dramatically better. Spend on new lower.
Speaker #1: FLR coming down quite substantially. Dividend cover now coming down. The return on equity jumping by just over a percentage point to 16.5%. That will come up over time as the bank obviously generates profitability.
Adrian Gore: The return on equity jumping by just over a percentage point to 16.5%. That will come up over time as the bank obviously generates profitability, but is always mitigated by the IFRS 17 release of profits from the life companies. If you look at where we're heading, the group is strong. We really have increasing confidence that by the end of 2029, we should be at the middle to the upper end of our earnings range around the growth corridor. Confident of that and the cash generation, giving us, we think, strong optionality. So a strong set of financial results we are very pleased with. I want to talk a bit about the business model, if I can. It's a fundamental issue. It's core to our purpose, but it's fundamental around what we're doing, our competitive advantage, and our ability to add value to all stakeholders that we serve.
Speaker #1: But it always mitigated by the IFRS 17 release of profits from, from the last companies. If you look at where we're heading, the group is strong.
Speaker #1: We really have increasing confidence that by the end of 2029, we should be at the middle to the upper end of our, of our earnings range around the, around the, the growth corridor.
Speaker #1: And confident of that and the cash generation, giving us, we think, strong optionality. So, a strong set of financial results we are very pleased with.
Speaker #1: I want to, I want to talk a bit about the business model, if I can. It's a fundamental issue. It's core to our purpose, but it's fundamental to what we're doing, our competitive advantage, and our ability to add value to all stakeholders.
Speaker #1: that we serve. Fundamentally, we're trying to get to a point where the business model is repeatable, scalable, understandable, but measurable in the distinct areas—kind of to shareholders, the idea of alpha that we started speaking about last year, and at the last results presentation.
Adrian Gore: Fundamentally, we're trying to get to a point where the business model is repeatable, scalable, understandable, but measurable in the distinct areas, kind of to shareholders, the idea of alpha that we started speaking about last year at the last results presentation. Also understanding how to fit customers' lifespan and health span, the actual concept of life expectancy, and then society, the societal effect. We need to understand that, measure it, and demonstrate and report on it. I think that's very important. I thought maybe just as a slight digression, if I can, I wanted to just explain at a higher level, at a macro level, kind of our belief in the relevance of the business model and what we are doing and what our industry can do at scale. Just understand the complexity of the funding of healthcare at a global level.
Speaker #1: But also understanding how to fit to customers: lifespan and health span, the EX, the actual concept of life expectancy, and then society—the societal effect.
Speaker #1: We need to understand that, measure it, and demonstrate and report on it. and I think that's very important. But I thought maybe just as a, as a slight, just as a slight digression, if I can, I wanted to just explain at a higher level, at a macro level, kind of our, our belief in the relevance of the business model and what we're doing and what our industry can do, at scale.
Speaker #1: Just understand the complexity of the funding of healthcare at a global level. There are some fundamental things taking place. The first is just depopulation.
Adrian Gore: There are some fundamental things taking place. The first is just depopulation. Fertility rates around the world have come down dramatically, and therefore all countries are depopulating. In fact, the only country, to my understanding, that is not, only countries are sub-Saharan Africa and the US with immigration. Most countries are depopulating. You see that on the left-hand side with the aging of populations. The proportion of people above 65 is climbing. This projection works in 5, 10, 15 years. It's actually not that far out into the future. By the end of our planning cycle, we're kind of in some of these tomorrows. So it actually is very important. So firstly, aging of populations. The effect of that on the second chart is that as people get older, chronicity creeps in, and therefore healthcare costs tend to rise.
Speaker #1: Fertility rates around the world have come down dramatically, and therefore, all countries are depopulating. In fact, to my understanding, the only countries that are not are in sub-Saharan Africa, and the US with immigration.
Speaker #1: But most countries are depopulating. You see that on the left-hand side, with the aging of populations. The proportion of people above 65 is climbing.
Speaker #1: And this projection works on 5, 10, 15 years. It's actually not that far out into the future. By the end of our planning cycle, you know, we're kind of in some of these scenarios.
Speaker #1: So it actually is very important. Firstly, aging of populations—the effect of that on the second chart is that as people get older, chronicity creeps in.
Speaker #1: And if a healthcare cost tends to rise, you can see that dramatic increase in healthcare cost based on age. That's kind of an actuarial derivation.
Adrian Gore: You can see that dramatic increase in healthcare costs based on age. That's kind of an actuarial derivation. Crudely, just a heuristic, people over 65 consume 3.5 times the healthcare people under 65. The problem is to the third piece of it is that the dependency ratio, the working age people to pensioners, is going down. Healthcare systems are funded by the tax base, by workers funding the entire healthcare system. You get to a point here where if the same number of pensioners to working population, their tax burden becomes very, very hard to bear. So you get kind of this multiplication of difficulty. The final point to make, well-known in health economics, is the Baumol's cost disease. The economist, William, spotted very cleverly that healthcare costs tend to rise always above CPI. Typically, CPI +3% to 5%.
Speaker #1: But crudely, just as a heuristic, people over 65 consume 3.5 times the healthcare of people under 65. Now, the problem is—the third piece of it—is that the dependency ratio, the working-age people to pensioners, is going down.
Speaker #1: Healthcare systems are funded by the tax base, by workers funding the entire healthcare system. You get to a point where, if there are the same number of pensioners as the working population, that tax burden becomes very, very hard to bear.
Speaker #1: And so you get kind of this multiplication of difficulty. And then the final point to make, well known in health economics, is Baumol's cost disease.
Speaker #1: The economist Baumol spotted very cleverly that healthcare costs tend to rise always above CPI, typically CPI of 3% to 5%, because in healthcare, unlike other industries, technology doesn't bring costs down.
Adrian Gore: Because in healthcare, unlike other industries, technology doesn't bring costs down. We've never seen efficiency in healthcare. That may change with AI, but until now, what technology does, and that's excellent, is it creates more things that healthcare can do, but it adds cost to the system. You have a commodity that's inflating above inflation. When you cross-multiply these things, you find that in 5 years, 10 years, 15 years, the actual healthcare burden on the tax base becomes incredible. The effect cumulatively by 2030 in these countries is 13% to 25%. By 2035, 30% to 57%, and by 2040, you see that 52 doubling. It's quite remarkable. The combined effect of aging populations with the cost of healthcare creates an unassailable or an incredibly difficult indexing problem. It turns out one of the only ways we can affect that is to make people healthier.
Speaker #1: We've never seen efficiency in healthcare. That may change with AI, but until now, what technology does—and that's excellent—is it creates more things that healthcare can do, but it adds cost to the system.
Speaker #1: And so, you have a commodity that's inflating above inflation. When you cross-multiply these things, you find that in five years, ten years, fifteen years, the actual healthcare burden on the tax base becomes incredible.
Speaker #1: The effect of that, cumulatively, by 2030 in these countries is 13% to 25%. By 2035, it's 30% to 57%. And by 2040, you see it at, you know, 50% to doubling.
Speaker #1: It's quite remarkable. So, the effect of the combined impact of aging populations with the cost of healthcare creates an unassailable, or an incredibly difficult, indexing problem.
Speaker #1: It turns out one of the only ways we can affect that is to make people healthier. When you do the analysis, it turns out that compressing morbidity is the most powerful thing.
Adrian Gore: When you do the analysis, it turns out that compressing morbidity is the most powerful thing. Lengthening lifespans on its own is not as helpful. We need to lengthen lifespan but health span at the same time. That's exactly what we are doing and trying to do at a systemic level. The health insurance industry, the life insurance industries have such considerable scale. They'll become more relevant over time. Health insurance is likely to grow when you do the analysis. Importantly, these are industries that are completely aligned to customers. The customers are healthier, they do better. At scale, these are industries that cover billions of people. The ability to do that, to bring down costs and make people healthier is real. On the right-hand side of the chart, you will have seen this analysis from me many, many times.
Speaker #1: Lengthy lifespans on their own are not as helpful. We need to lengthen lifespan and healthspan at the same time. And that's exactly what we are doing and trying to do at a systemic level.
Speaker #1: The health insurance industry and the life insurance industries have such considerable scale. They'll become more relevant over time. Health insurance is likely to grow when you do the analysis.
Speaker #1: But importantly, these are industries that are completely aligned to customers. When customers are healthier, they do better. And so, at scale, these are industries that cover billions of people.
Speaker #1: The ability to do that, to bring down costs and make people healthier, is real. On the right-hand side of the chart, you will have seen this analysis from me many, many times.
Speaker #1: But the causal effect of behavior change is so dramatic on lifespan and healthspan that it's an easy payback. It's one of the only things that can bring down this burden.
Adrian Gore: The causal effect of behavior change is so dramatic on lifespan and health span, that it's an easy payback. It's one of the only things that can bring down this burden. Expect these kind of forces to accelerate and expect our industry, hopefully, to metamorphosize over time. We are focusing hard on trying to make that transformation. We want an industry that is not just transactional, but making people healthier. That talks to the micro focus of our group on our model. As I said before, shareholders, customers, society, how the value chain is played out. The Vitality model has evolved from a simple Vitality structure attached to an institutional business to a complex structure now. With Google, we're working on hyper-personalization, understanding the value chain completely from pricing, behavior change, optimized retention, to sharing incentives in the right way.
Speaker #1: So expect these kinds of forces to accelerate. And expect our industry, hopefully, to metamorphosize over time. We're focusing—hold on—trying to make that transformation, moving toward an industry that is not just transactional, but one that's making people healthier.
Speaker #1: And that talks to the micro-focus of our group on our model. And as I said before—shareholders, customers, society—how the value chain has played out, the vitality model has evolved from kind of a simple vitality structure and text, to an institutional business, to a complex structure. Now, with Google, we're working on hyper-personalization, understanding the value chain completely, from pricing, behavior change, optimized retention, to sharing incentives in the right way, and in a hyper-personalized way that gets behavior change and creates the right form of economics.
Adrian Gore: In a hyper-personalized way, it gets behavior change, it creates the right form of economics. You should be able to measure these things in three distinct issues. Alpha, the excess returns that shareholders get through the effectiveness of the model. EX, the added lifespan and health span that individual customers get by engaging in the model. Thirdly, SX, society, the positive societal impact arising from compressing morbidity. Those things should be completely and totally measurable. What is exciting is in this particular year, I think the ability to illustrate Alpha, EX, and SX has been remarkable. It's been a remarkable period to illustrate how powerful the model has worked. We began publishing the Alpha coefficient last year, and you can see across the screen all of our different businesses in the 25 year. That continued in 2026, and in fact, in many cases got stronger.
Speaker #1: You should be able to measure these things in three distinct issues: Alpha, the excess returns that shareholders get through the effect and interest of the model.
Speaker #1: EX, the added lifespan and healthspan that individual customers get by engaging in the model. And thirdly, SX, society, the positive societal impact arising from compressing morbidity.
Speaker #1: And those things should be completely and totally measurable. What is exciting is, in this particular year, I think the ability to illustrate Alpha EX and SX has been remarkable.
Speaker #1: It's been a remarkable period to illustrate how powerful the model has worked. We began publishing the alpha, alpha coefficient, last year. And you can see across the screen all of our different businesses in the 25-year.
Speaker #1: That continued in 2026 and, in fact, in many cases got stronger. So, in the case of the UK, you can see the return on new business up to risk-free plus nearly 10%.
Adrian Gore: In the case of the UK, you can see the internal rate of return on new business up to risk free plus nearly 10%. Operating margin up to 19.2% in VitalityHealth. Insurer margin really came up to nearly 15%. In the Discovery Life and Invest businesses, slightly down on last year. There was a business in exchange, but still excellent return. In the Discovery Health Medical Scheme, the Alpha really is for cost of healthcare. It is not a for-profit entity. We will measure that at the end of this year going into the 2027 year, but our expectation is not very different from close to 18% cost of benefit per unit of benefit difference to the average in the market. Then you will see in the bank, the mathematics, we believe, will bring the cost-income ratio down very, very quickly. It has just broken even and made a profit.
Speaker #1: Operating margin up to 19.2% in Vitality Health. Ensure the margin really came up to nearly 15%. And I like Discovery Life and Invest businesses, slightly down on last year.
Speaker #1: There was a business in exchange, but still, excellent return. In the Discovery Health Medical Scheme, the alpha really is the cost of healthcare. It's not a for-profit entity.
Speaker #1: We'll measure that at the end of this year, going into the 2027 year. But expectation is not very different from 18—close to 18% cost to benefit per unit, per unit to benefit difference to the average in the market.
Speaker #1: And then you'll see in the bank, the mathematics, we believe, will bring the cost-to-income ratio down very, very quickly. It's just broken even and made a profit.
Speaker #1: So this is an early time, but the mathematics look very clear. But the point to be made here, as you can see throughout the group, is the effect of the model—of better pricing, of better behavior change, of selective relaxations, positive selective relaxation, and then volume scaling it in terms of excellent new business scale of the group.
Adrian Gore: This is an early time, but the mathematics look very clear. The point to be made here, as you can see, throughout the group, the effect of the model of better pricing, of better behavior change, of selective lapsation, positive selective lapsation, and then volume scaling it in terms of excellent new business and the scale of the group. Importantly, at the individual level, to individuals, we are making effect on the individual's life, how they live, their health span, their lifespan, how they drive, how they manage money. That is important. But you can see it in a combined effect in the excess claim savings that we achieved across the group. In fact, over this financial year, ZAR 2.2 billion of excess claim savings came through. You can see the distribution of it on the slide. It is quite remarkable. I think Discovery Life over ZAR 1 billion.
Speaker #1: Importantly, at the individual level, we're making an effect on individuals' lives—how they live, their health span, their lifespan, how they drive, and how they manage money.
Speaker #1: That's important. But you can see it in the combined effect of the excess claim savings that were achieved across the group. In fact, over this financial year, $2.2 billion of excess claim savings came through.
Speaker #1: You can see the distribution of it on the slide. It's quite remarkable, I think. Discovery Life, over $1 billion; in the UK combined, nearly three-quarters of a billion.
Adrian Gore: In the UK combined, nearly three quarters of a billion. Insurers excess claim savings or the claim savings generated of claim savings, nearly half a billion. I made the point about the bank, and the Discovery Health Medical Scheme. It is a remarkable performance, and I think that is a theme that came through over the entire construct of the year. The EX is very much intact, and that is just evidence strongly the effect we are having on individual customers, and that gets back to our purpose. From a societal perspective, we measure very carefully and report accurately in our ESG reporting exactly the effect we have on people. What we are seeing over the year, 54 million lives affected through us and our partners. We measured 725 million healthy activities, and our actual analysis illustrated that we saved over 5 million life years, which is quite remarkable.
Speaker #1: Insurance excess claim savings, or, or the claim savings of claim savings, nearly half a billion. And I made the point about the bank, and the discovery health medical scheme.
Speaker #1: It's a remarkable performance, and I think that's a theme that came through over the entire construct of the year. So the EX is very much intact.
Speaker #1: And let's, as evidence, strongly highlight the effect we're having on individual customers. And that gets back to our purpose. From a societal perspective, we measure very carefully and report accurately in our ESG reporting exactly the effect we have on people. What we're seeing over the year is 54 million lives affected through us and our partners.
Speaker #1: We measured 725 million healthy activities. And actually, our analysis illustrated that we saved over 5 million life years, which is quite remarkable. We gave back $17 billion in value through the shared value model.
Adrian Gore: We gave back ZAR 17 billion in value through the shared value model, so through premium reductions, cash backs, paybacks, benefits, et cetera. It is a remarkable kind of illustration of shared value. What is important to point out, it is interesting, it may be coincidental, but I think a wonderful illustration of the balance of the model. The operating profit of the group was ZAR 17 billion. The shared value given to customers was ZAR 17 billion. So to an extent, kind of the two stakeholders, shareholders versus customers, an equality of value. I think that is very powerful and important. The model really is getting considerable traction, and you now see it evidenced in the results under review. We continue to evolve the model. I think the step into Sleep and making Sleep a critical component of this next generation of Vitality has been incredibly successful.
Speaker #1: So, through premium reductions, cashbacks, paybacks, benefits, et cetera. It's a remarkable kind of illustration of shared value. What is important to point out—and interesting—it may be coincidental, but I think it's a wonderful illustration of the balance of the model.
Speaker #1: The operating profit of the group was $17 billion. The shared value given to customers was $17 billion. So, to an extent, kind of the two stakeholders—shareholders versus customers—an equality of value.
Speaker #1: And I think that's very powerful and important. So the model really is getting considerable, considerable traction. And you now see it evidenced in the results under review.
Speaker #1: We continue to evolve the model. I think that the step into sleep, and making sleep a critical component of this next generation of vitality, is being incredibly successful. Using all of our data, we understood the causal effect of better sleep: 7% lower hospital claims and a 24% reduction in mortality. The way the team has rolled out the sleep benefit—and will roll it out globally—has been absolutely, I think, tremendous.
Adrian Gore: Using all of our data, we understood the causality effect of better sleep, 17% lower hospital claims, 24% reduction in mortality. The way the team has rolled out the sleep benefit and will be rolled out globally has been absolutely, I think, tremendous. You can see from the graph the take-up of Sleep has been faster than any other benefit we have rolled out, far faster than Active Rewards, which has been probably one of the most successful things I think we have done in terms of changing behavior. Sleep has been even faster than that and will, over time, architect into exactly the same form. Already, 16% of our members have reported improved sleeping habits, and I think that is, of course, incredible. The model is getting considerable traction, and I think we now have the ability to evidence it in exactly how it plays out in the various constituencies.
Speaker #1: You can see from the graph, the take-up of sleep has been faster than any other benefit we've rolled out—far faster than Active Rewards, which has been probably one of the most successful things, I think, we've done in terms of changing behavior. Sleep has been even faster than that.
Speaker #1: And we'll, over time, architect into exactly the same form. Already, 16% of our members have reported improved sleeping habits, and I think that's, of course, incredible.
Speaker #1: So the model is getting considerable, considerable, traction. And I think we now have the ev the ability to evidence it in exactly how it plays out in the various, in the various constituencies.
Speaker #1: I want to turn to the businesses, and give you an inkling on the business strategy. I'll make comments, I hope at a high level, on the different businesses.
Adrian Gore: I want to turn to the businesses and give you an inkling on the business strategy. I will make comments, hopefully at a high level, on the different businesses, but give you an insight as to where we are going. The two composites I think are incredibly well-positioned. There are two distinct derivations of the Vitality shared value model that are going to play out. We have worked hard over the year to build them, and they get continued attention and focus. In the case of Discovery South Africa, the power of the idea of the super bank strategy. The super bank is really forming. It will be launched in October, and that is a big step, a second phase, I think, in the evolution of Discovery Bank. And then Vitality AI.
Speaker #1: But to give you an insight as to where we're going, the two competencies I think are incredibly well positioned. There are two distinct derivations of the Vitality Shared Value model that are going to play out.
Speaker #1: We've worked hard over the year to build them, and they get continued attention and focus. In the case of Discovery South Africa, the power of the idea of the super bank strategy—the super bank—is really forming and will be launched in October.
Speaker #1: And that's a big step—a second phase, I think—in the evolution of Discovery Bank. And then Vitality AI—we launched this in London with Google, late in the calendar year.
Adrian Gore: We launched this in London with Google late in the calendar year, so kind of towards the end of H1, and we are now launching New York in 2 weeks' time. Just considerable more intensity around Vitality AI, getting it to partners and getting it to prospective partners. These are two very important derivations of the Vitality shared value model that we hope will take us into a very different space. But let me talk to each of the composites. Firstly, Discovery South Africa had a tremendous period. Earnings up 16%. I made the point, and you will have seen that our corridor of intended earnings is 12.5% to 17.5% growth. At 16%, we are in the upper end of that band, so I think a very good performance. The businesses are all remarkably strong. The strategy over this 5-year cycle is three pieces. One, scale the bank to excellence and leadership.
Speaker #1: So, kind of towards the end of H1, and we're now launching New York in two weeks' time, there's just considerably more intensity around Vitality AI—getting it to partners and getting it to prospective partners.
Speaker #1: So these are two very, very important derivations of the Vitality shared value model that we hope will take us into a very, very different space.
Speaker #1: But let me talk to each of the, each of the competencies. Firstly, discovery South Africa, had a tremendous period earnings up 16%. I made the point, and you'll have seen that our kind of our, our corridor of, of intended earnings is 12, 12 and a half to 17 and a half percent growth, at 16%.
Speaker #1: We're in the upper end of that band, so I think a very, very good performance. The businesses are all remarkably strong. The strategy over this five-year cycle is three pieces.
Speaker #1: One, scale the bank to excellence and leadership. Two, make sure all of our Discovery businesses are growing and are leaders in their category. And three, the super bank strategy.
Adrian Gore: Two, make sure all of our Discovery businesses are growing and are leaders in their category. And three, the super bank strategy. Pull all of this into an integrated architecture on the face of the bank. That is what we set out to do. I think the progress in this period has been absolutely tremendous. The bank itself has performed ahead of expectation. You can see on the face place of the slide, very strong growth. Total clients up 26%, deposits up, gross advances up 40%, revenue up 31%. As you can see, considerable growth in revenue and profit now flipping very strongly, and that kind of growth in profit mathematically, we expect to continue. If you look at the different dimensions of the bank, growth, quality, efficiency, all, I think, are exceptionally good and really talk to the hypothesis behind the bank.
Speaker #1: Pull all of this into an integrated architecture on the face of the bank. That's what we set out to do. I think the progress in this period has been absolutely tremendous.
Speaker #1: The bank itself has performed ahead of expectations. You can see on the face page of the slide: very strong growth, total clients up 26%, deposits up, gross advances up 40%, revenue up 31%. As you can see, considerable growth in revenue and profit.
Speaker #1: Now flipping very strongly. And that kind of growth in profit, mathematically, we expect to continue. If you look at the different dimensions of the bank—growth, quality, efficiency—all, I think, are exceptionally good and really speak to the hypothesis behind the bank.
Speaker #1: Shared value, digital, full-service bank, and then ultimately integration, which speaks to the super bank strategy. If you look at growth, daily sales continue to climb.
Adrian Gore: Shared value, digital full-service bank, and ultimately integration, which talks to the super bank strategy. If you look at growth, daily sales continue to climb, now to over 1,500 per day. You can see the quality of the advances book, the home loan book, fully 80% or 90% of it is prime plus or super prime, which I think is obviously important. The credit loss ratio stays low. Very interesting on the servicing side, the use of AI technology has been tremendous in this period. You can see the kind of servicing load, the second graph from the left, was fully voice call in January 2025. You can see now that AI has taken over more than 50% of it. It is quite remarkable.
Speaker #1: That's over 1,500 per day. You can see the quality of the advances book, the home loan book—fully, fully 80 or 90% of it is prime plus or super prime, which I think is obviously important.
Speaker #1: The credit loss ratio stays low. Very interesting on the servicing side, the use of AI technology has been tremendous in this period. You can see the kind of servicing load—the second graph from the left was fully voice call by January 2025.
Speaker #1: You can see now that AI has taken over more than 50% of it. It's quite remarkable. And other bits of technology in that calling, which is where we're moving, with the bank has taken up a lot of it.
Adrian Gore: Other bits of technology in that calling, which is where we are moving with the bank, has taken up a lot of it, and voice call is now a small piece of it. It allows us now to grow the client base significantly while keeping the call volume flat, again, talking to efficiency and importantly, quality of service to our clients. Effectively, the bank is a very complicated business, extremely complicated. The profitability actually, as we have showed before, is arithmetically quite easy to calculate. It is client growth, number of clients, times the profit per client. The profit per client is revenue per client, less expenses per client, less impairments per client. That effectively gives us the profitability. The important point is, I think the three issues here, shared value, which gets a better level of impairments, better growth, better behavior, better revenue people come through.
Speaker #1: And voice call is now a small piece of it. It allows us now to grow the client base significantly while keeping the call volume flat.
Speaker #1: Again, talking to efficiency and, importantly, quality of service to our clients. Effectively, the bank is a very complicated business—extremely complicated. But the profitability, actually, as we've shown before, is arithmetically quite easy to calculate.
Speaker #1: It's client growth, number of clients, times the profit per client. The profit per client is revenue per client. There are expenses per client, less impairments per client.
Speaker #1: That effectively gives us the profitability. The important point is, I think, that there are three issues here: shared value, which gets a better level of impairments, better growth, better behavior, better revenue. People coming through the full services matrix means that people are buying a lot from the bank, driving NIR and NRI.
Adrian Gore: The full services nature means that people are buying a lot from the bank, driving NIR and NII. Of course, the digital nature of the bank giving a fixed cost base that now is largely fixed with some variability, but remarkably efficient. You can see that in how the expenses are coming down as we grow. So you get this strong growth, flat revenue, flat impairments per client, reducing expenses. That creates a mathematically geared effect, as you can see in how the profit has turned around and has given us confidence that we can achieve the ZAR 3 billion profit target before acquisition costs by 2029. That is the ambition and how we are progressing. We feel increasing confident that in fact is achievable.
Speaker #1: And then, of course, the digital nature of the bank gives it a kind of fixed cost base that now is largely fixed. There’s some variability, but it’s remarkably efficient.
Speaker #1: And you can see that in how the expenses are coming down as we grow. So, you get strong growth, flat revenue, flat impairments per client, and reducing expenses.
Speaker #1: That creates a mathematically geared effect, as you can see in how the profit has turned around and has given us confidence that we can achieve the $3 billion profit target before acquisition cost by 2029.
Speaker #1: That is the ambition and how we are progressing. We feel increasing comfort that that, in fact, is achievable. So, to an extent, I would put it to you that the bank—the bank—has kind of finished its first phase of evolution.
Adrian Gore: To an extent, I would put it to you that the bank is finished its first phase of evolution. Now profitable, client receptivity is quite remarkable. We thought we would show you this. The Ask Afrika survey came out, I think, a few days ago. Again, we ranked number 1 in banking, number 2 in private banking, which is quite remarkable. But if you look at NPS scores compared to others, dramatically better. So the bank, from a profitability perspective, from a dynamics perspective, is performing, I think, incredibly well. The client receptivity is remarkable. So it is in a very strong position. Thank you. It is in a very strong position, as I think you can see. The way forward is really the case for the super bank. Just bear in mind, it is an amazing statistic. Nearly 70% of people joining the bank now are not Discovery members.
Speaker #1: Now profitable, client receptivity is quite remarkable. We thought we'd show you this—the Ask Afrika survey came out, I think, a few days ago. Again, we ranked number one in banking, number two in private banking, which is quite remarkable.
Speaker #1: But if you look at NPS scores compared to others, they're dramatically better. So the bank, from a profitability perspective, from a dynamics perspective, is performing, I think, incredibly well.
Speaker #1: The client receptivity is remarkable. So it's in a very, very it's in a very strong position. Thank you. It's in a very, very strong position, as, as I think you can see.
Speaker #1: The way forward is really the case for the Super Bank. Because, just bear in mind, it's an amazing statistic: nearly 70% of people joining the bank now are not Discovery members.
Speaker #1: They have no Discovery products whatsoever, so the opportunity to bring them into the bank, to get them to engage in the bank—but, of course, to get them to buy other Discovery products, because they all work together so well—is incredibly strong.
Adrian Gore: They have no Discovery products whatsoever. The opportunity to bring them into the bank, to get them to engage in the bank, but of course, to get them to buy other Discovery products, because they all work together so well, is incredibly strong. In the middle of the chart, you can see, in fact, that if you superimpose the bank client base over the rest of Discovery, it is actually quite a small footprint. So there are millions of members in the Discovery base that are not members of the bank. From both sides, the potential to grow is quite significant. We know on the right-hand side of the chart that as people integrate in our products, they integrate faster and more. Intellectually, the potential for growth is quite remarkable in terms of the bank.
Speaker #1: In the middle of the chart, you can see, in fact, that if you superimpose the bank client base over the rest of Discovery, it's actually quite a small footprint.
Speaker #1: So, there are millions of members in the Discovery base who aren't members of the bank. And so, from both sides, the potential to grow is quite significant.
Speaker #1: We know, on the right-hand side of the chart, that as people integrate with our products, they integrate faster and more. So, intellectually, the potential for growth is quite remarkable in terms of the bank.
Speaker #1: But from a structural perspective—and this is the opportunity—the bank, in and of itself, is now loaded with functionality. All of our businesses of scale aren't exactly the same architecture.
Adrian Gore: From a structural perspective, and this is the opportunity, the bank in and of itself is now loaded with functionality. All of our businesses of scale are on exactly the same architecture, the Vitality shared value model that fit onto the face of the bank. We have considerable data and AI capabilities across the entire group of all of our customers. So it provides a unique opportunity to create this platform that is different. A super bank that is different. A bank that is really not a transactional instrument, but an integrated control layer for customers' entire economic life, orchestrating financial needs, health needs, ecosystem needs, and converting verified behavior change into real value that the clients feel. Now, what you will see rolling out in October, conceptually, I am showing it to you, but the actual product will come out, is really, I think, advancing on three fronts.
Speaker #1: The Vitality Shared Value model, they fit onto the face of the bank. We have considerable data and AI capabilities across the entire group and all of our customers.
Speaker #1: So it provides a unique opportunity to create this, this platform that is different—a super bank that is different—a bank that is really not a transactional instrument, but an integrated control layer for customers' entire economic life.
Speaker #1: Orchestrating financial needs, health needs, ecosystem needs, and converting verified behavior change into real value that the clients feel. And what you will see rolling out in October—conceptually, I'm showing it to you now, but the actual products will come out later—is, really, I think, an advancement on three fronts: value to customers on three fronts.
Adrian Gore: Value to customers on three fronts. One is kind of management functionality. As the bank grows its functionality and the ecosystems grow, you get this ability to access ecosystems from health to fitness, to travel, to fuel, to food, et cetera. That is what you will see. So kind of a cross-section of those, which creates considerable functionality, access, management capabilities for customers on the face of the mobile. The second is the bank is forming the rails of the group. To an extent, when you analyze the power of the bank, security, anti-fraud, payment systems is actually the tool for all of the products. Going forward over time, whatever product you buy from Discovery, whether you are a bank account holder or not, you will be using the rails of the bank. That gives us the ability to offer you dramatically more value.
Speaker #1: One is a kind of management functionality. As the bank grows its functionality and the ecosystems grow, you get this ability to access ecosystems from health to fitness, to travel, to fuel, to food, et cetera.
Speaker #1: And that's what you will see—so, kind of the cross-section of those, which creates considerable functionality, access, and management capabilities for customers. On the face of mobile, the second is kind of the bank forming the rails of the group.
Speaker #1: To an extent, when you analyze the power of the bank, security, anti-fraud, payment systems, is actually the tool for all of the products. Again, going forward over time, whatever product you buy from discovery, whether you're a bank account, whether you're a bank account holder or not, you'll be using the, the rails of the bank.
Speaker #1: And that gives us the ability to offer you dramatically more value. And then finally—and I think this is very exciting—is that we can exponentially drive shared value.
Adrian Gore: Finally, and I think very exciting, is that we can exponentially drive shared value. What we are doing at the moment is on the vertical of that, of the right-hand side, is really the traditional Vitality shared value model. Vitality Drive, health, money. People get discounts and incentives and rewards, and that is great. But bring them together in a much more concerted way, much more consistent way, easier to understand and more powerful. Critically now, bringing the different products onto the face of the bank creates portfolio value. You bring the two together, you get kind of an exponential effect on shared value. You will see, hopefully in October, I think significant enhancement to the benefits and the structures of the bank that drive that shared value. So it really is forming into a very, very powerful composite maker.
Speaker #1: What we're doing at the moment is, on the vertical of that, on the right-hand side, is really the traditional Vitality shared value model—Vitality Drive, Health, Money—people get discounts and incentives and rewards.
Speaker #1: And that's great. But bringing them together in a much more concerted way, much more consistent way, easier to understand, and more powerful. But critically now, bringing the different products onto the face of the bank creates portfolio value.
Speaker #1: And so, when we bring the two together, you get kind of an exponential effect on shared value. And you will see, hopefully in October, I think, significant enhancement to the benefits and the structures of the bank that drive that shared value.
Speaker #1: So it really is forming into a very, very powerful composite maker. The year has been a busy one building this. The bank team has done a remarkable job, as have all of the businesses getting ready for this.
Adrian Gore: The year has been a busy one building this. The bank team has done a remarkable job, as have all of the businesses getting ready for this, and you will see that play out in October. I want to make some comments on the South African businesses. They performed well and are in very strong positions. Discovery Health had, I think, a remarkable period. Despite its scale, new business up 10%, normalized profit up 9%. You can see non-scheme lives gained 22%. I showed you the growth of new business earlier. Massive membership under administration. What is interesting, and I do want to commend the Discovery Health team, is the complexity of managing the healthcare for nearly 4 million people is quite remarkable. Just bear in mind, the medical scheme population is largely static, given regulation, given minimum prices, et cetera.
Speaker #1: And you will see that play out in October. I want to make some comments on the South African businesses that performed well, and their very strong positions.
Speaker #1: Discovery Health had, I think, a remarkable period. Despite its scale, new business was up 10%, and normalized profit was up 9%. You can see non-scheme lines growing 22%.
Speaker #1: I showed you the growth of new business earlier. Massive membership, kind of under administration. What is interesting—and I do want to commend the Discovery Health team—is the complexity of managing the healthcare of nearly 4 million people is quite remarkable.
Speaker #1: Just bear in mind, the medical scheme population is largely static, given regulation, given minimum prices, etcetera. While the country is growing and getting younger, the medical scheme population is not.
Adrian Gore: While the country is growing and getting younger, the medical scheme population is not. You have a microcosm of that situation I showed you earlier about depopulation, aging. All that is taking place inside the medical scheme space. It is manageable, as I said before, by focusing on compressing morbidity. That is exactly what the Discovery Health team is doing. If you look on the left-hand side of the chart, it is quite remarkable. Over 10 years, you can see an increasing chronicity inside the base that we cover. Before, the number of people with chronic ailments was much smaller. Today, fully 33% of the members we cover have one, two or three or more chronic conditions. The cancer prevalence has gone up 120%. The Discovery Health Medical Scheme has 46% higher cancer prevalence than the other schemes combined. It is quite remarkable.
Speaker #1: And so, you have kind of a microcosm of that situation I showed you earlier about depopulation, aging—all of that is taking place inside the medical scheme space.
Speaker #1: But it is manageable, as I said before, by focusing on compressing mobility. And that is exactly what the Discovery Health team is doing. So, if you look on the left-hand side of the chart, it is quite remarkable.
Speaker #1: Over 10 years, you can see an increasing chronicity inside the base that we cover. So before, you know, the number of people with chronic ailments was much smaller. Today, fully 33% of the members we cover have one, two, three, or more chronic conditions.
Speaker #1: The cancer prevalence has gone up 120%. The Discovery Health medical scheme has 46% higher cancer prevalence than the other schemes combined. It's quite remarkable.
Speaker #1: The fact is, it's a day-factor standard. If you're sick, you're going to be covered by the Discovery Health Medical Scheme. And that's a good thing.
Adrian Gore: The fact is that today, fact are standard. If you are sick, you are only covered by the Discovery Health Medical Scheme. That is a good thing. That is what we do. You can see the scale of the problem. The way it is being managed is through all of the tools that we have spoken about, the Vitality Shared Value Model, Personal Health Pathways. You can see from the data the Discovery Health published, the effect of it, bringing mortality down by nearly 6% over the past 10 years. Dramatically better life expectancy for people living with cancer, up seven years over the last 15 years, better survival rates. Across the board, much better results coming out. Then a critical thing, the ability to keep filling up the scheme with new members. There is a natural lapse progression.
Speaker #1: That's what we do. But you can see the scale of the problem. The way it's being managed is through all of the tools that we've spoken about—the Vitality Shared-Value model, personal health pathways.
Speaker #1: And you can see from the data Discovery Health published, the effect of it—bringing mortality down by nearly 6% over the past 10 years—dramatically better life expectancy for people living with cancer, up seven years over the last 15 years, and a better survival rate.
Speaker #1: So, across the board, much better results coming out. And then a critical thing: the ability to keep filling up the scheme with new members.
Speaker #1: So there's a natural lapse progression. Just to keep the scheme stable requires 280,000 to 300,000 new lives a year. So the ability to continue to do that and to have the power of innovation, distribution channels, you can see that.
Adrian Gore: Just to keep the scheme stable requires 280,000 to 300,000 new lives a year. The ability to continue to do that and to have the power of innovation distribution channels, you can see that in effect in this period under review was in fact a record period. Over 310,000, 320,000 members joined the Discovery Health Medical Scheme. When you remove this complexity and you look kind of above the water at the medical scheme, it just is calm and strong. It remains incredibly powerful, 57%, 58% market share, bigger than the combined sum of all the others. Customer satisfaction, you can see very little buys and buy downs. People stayed very, very stable. Less than 2% of people are actually buying down. People staying for it. The lapse rates remain very much in control.
Speaker #1: And in fact, this period under review was a record period—over 310,000, 320,000 members joined the Discovery Health Medical Scheme. When you remove this complexity and you look, kind of, above the water at the medical scheme, it just is calm and strong.
Speaker #1: It remains incredibly powerful—57, 58% market share—bigger than the combined sum of all the others. Customer satisfaction, you can see very little bars and bar downs.
Speaker #1: People stay very, very stable. Less than 2% of people actually buying down. So, people are staying with what they have. The lapse rates remain very much in control.
Speaker #1: Solvency levels above, significantly above 25%, over 35%, with $33 billion of reserves sitting in the scheme. So you can see that while there's considerable complexity in managing healthcare for individuals, the effect of all of the tools being used—from distribution, managed care, population management, Vitality, personal health pathways—is having a remarkable effect on the stability of the system.
Adrian Gore: Solvency levels significantly above 25%, over 35%, ZAR 33 billion of reserves sitting in the scheme. You can see that while there is considerable complexity on managing healthcare of the individuals, the effect of all of the tools being used, from distribution, managed care, population management, Vitality Personal Health Pathways, is having a remarkable effect on the stability of the system. So very well-positioned going forward. Let me turn to Discovery Life. I think the primary thing to call out, I think robust operating profit growth at 6%. The primary call out just is the remarkable mortality and morbidity experience that drove growth, that drove cash generation. You can see the cash generation has been climbing significantly, but really a strong increase in growth, 67% cash conversion to just under ZAR 3.9 billion of cash.
Speaker #1: So, very well positioned going forward. Let me turn to Discovery Life. I think the primary thing to call out is robust, robust operating profit growth, up 6%.
Speaker #1: The primary thing to call out is just the remarkable mortality and morbidity experience. That drove growth; it drove cash generation. You can see the cash generation has been climbing significantly, but really a strong increase in growth.
Speaker #1: 67% cash conversion to just over R3.8 billion, just under R3.9 billion of cash. New business up 1% in total, but that was somewhat affected by automatic contribution increases and inflation coming down, bringing that effect down.
Adrian Gore: New business up 1% in total, but that was somewhat affected by automatic contribution increases. Inflation coming down, bringing that effect down. If you strip out the effect of inflation, it would be a 9% increase in new business. We should do more of that, but we still, I think, are above the 30% market share. But we must focus on that very carefully. That is, new business up 43%, driven primarily by low rates of interest. If you look at the actual build-up to embedded value, you can see, I think, the quality of the business. The first piece on the left-hand side showing total experience variances up to ZAR 1.2 billion. As you can see, total non-economic experience is up ZAR 800 million. You can see the mortality and morbidity scale on the left-hand side, and you see policy alterations bringing it down.
Speaker #1: If you strip out the effect of inflation, it would be a 9% increase in new business. We should do more of that, but we still, I think, are above the 30% market share.
Speaker #1: But we must focus on that very carefully. That is new business up 43%, driven primarily by lower rates—by lower rates of interest. If you look at the actual build-up to the embedded value, you can see, I think, the quality of the business. The first piece, on the left-hand side, shows total experience variances up to $1.2 billion. As you can see, total non-economic experiences are up $800 million.
Speaker #1: You can see the mortality and mobility scale on the left-hand side, and you see policy alterations bringing it down. The policy alterations are a very important issue for us to manage; we have taken a number of steps over the year.
Adrian Gore: The policy alterations is a very important issue for us to manage. We have taken a number of steps over the year. Those are now built into the systems, and we expect that policy alt negative to come down quite significantly over the next 18 months. We hope the mortality profit continues. So we are feeling optimistic about how the progression of expected variances is likely to play out. You can see the improved VNB margin if you go to the right-hand side. The embedded value growth is just under 23%. Without the effect of interest rates up 12%, and I think a very good progression. Positive experience variance is good for VNB in the unwind of the discount rate, giving you that ZAR 63 billion of embedded value. Finally, in Discovery Life, very important. We did want to show you just the effect of mortality.
Speaker #1: Those are now built into the systems, and we expect that policy alts negative to come down quite significantly over the next 18 months. We hope the mortality profit continues.
Speaker #1: So, we are feeling optimistic about how the progression of expected variances is likely to play out. You can see the improved VMB margin. If you go to the right-hand side, the embedded value growth is just under 23%.
Speaker #1: Without the effect of interest rates, up 12%, and I think a very good progression. Positive experience variances, good VOMB, and the unwind of the discount rate, giving you that 63 billion of embedded value.
Speaker #1: Finally, on Discovery Life—sorry, very importantly—I did, we did, want to show you just the effect of mortality. It's quite a remarkable, I felt, analysis.
Adrian Gore: It is quite a remarkable I Felt analysis. Just showing you where that mortality experience is performing so well. How Vitality works is, as people engage, we expect lower mortality, and that is in the expectation. But what this chart shows on the left-hand side, it is a busy chart, but let me just show you what it means, is essentially year by year in the different statuses. What you will see if you cast your eye to the right-hand side of the chart, of that first graph, you can actually see as people engage, mortality comes down. But in fact, year by year, that improvement has got better and better and better. And that is what is driving that excess mortality gain. Bear in mind that people in silver, gold, and diamond are quite substantial. 40% of the base is engaged in silver, gold, and diamond.
Speaker #1: Just showing you where that mortality experience is performing so well. How Vitality works is, as people engage, we expect lower mortality. And that's in the expectation.
Speaker #1: But what this chart shows on the left-hand side, it's a busy chart, but, but let, let me just show you what, what, what, what, what, what it means is, essentially, year by year in the different statuses.
Speaker #1: What you will see, if your costs are either the right-hand side of, of, of the chart, of, of that first graph, you can actually see as people engage, mortality comes down.
Speaker #1: But in fact, year by year, that improvement has got better and better and better. And that's what's driving that excess mortality gain. Bear in mind that people in Silver, Gold, and Diamond are quite substantial.
Speaker #1: Forty percent of the base is engaged and is in Silver, Gold, and Diamond. So, when you see that excellent progression of engagement and the causal effect on mortality, you see that coming through in mortality gain.
Adrian Gore: When you see that excellent progression of engagement and the cause and effect of mortality, you see that coming through in our mortality gain. The other piece of analysis I think is absolutely wonderful and important socially is it's a more powerful effect for the over 50-year-olds. Over 50-year-olds had a better effect on mortality, and you can see in the extreme right-hand side, the 35% of those 50-year-olds that are engaged created 90% of their gain. It's a remarkable result, and it's some of the dogma I think we have to deal with. People often think, "I'm now over 50, over 60. I've got a chronic illness. I've smoked my whole life. I'm not fit. It's too late for me." That is not the truth.
Speaker #1: And the other piece of analysis, I think, is absolutely wonderful and important socially, is that a more powerful effect of over-50-year-olds.
Speaker #1: So, over-50-year-olds had a better effect on mortality, and you can see on the extreme right-hand side that 35% of those over-50-year-olds who are engaged created 90% of their gain.
Speaker #1: So it's a mo it's a remarkable result. And it's, it's some of the dogma I think we have to we have to deal with.
Speaker #1: People often think, you know, I'm now over 50, over 60, I've got a chronic illness, I've smoked my whole life, I'm not fit. It's too late for me.
Speaker #1: That is not the truth. The data shows clearly that when you're older and sicker, doing these things has an even bigger effect on your relative mortality.
Adrian Gore: The data shows clearly that when you're older and sicker, doing these things has even a bigger effect on your relative mortality. You see it coming through at the individual level. We're making a real difference to individuals. But at a composite level in Discovery Life, you can see it coming through. I think that's important. To end off on Discovery Life, just to make the point about the technical issues of IFRS 17, you can see the growth in the store of value, driven primarily by lower long-term rates of interest. The store of value, the CSM, the risk adjustment, and the IFR growing significantly by 66% to just under ZAR 40 billion, as you can see. We've opted for OCI treatment, so we've tried our best to kind of minimize economic volatility out of our P&L. This comes through the IFR.
Speaker #1: So you said, coming through the individual level, we're making a real difference to individuals. But at a company level, in Discovery Life, you can see it coming through.
Speaker #1: I think that's important. At the end of Discovery Life, just to make the point about the technical issues of IFRS 17, you can see the growth in the store of value, driven primarily by lower long-term rates of interest.
Speaker #1: So the store of value, the CSM, the risk adjustment, and the IFR growing significantly by 66%, to just under $40 billion, as you can see.
Speaker #1: We've opted for OCR treatments, so we've tried our best to minimize economic volatility out of our P&L. This then comes through the IFR.
Speaker #1: It doesn't come through the P&L. I think that's right. As you get those massive bloating and reductions as insurance moves up and down, I think it's done that well.
Adrian Gore: It doesn't come through the P&L. I think that's right. Else you get this massive bloating and reductions as insurance move up and down. I think it's done that well. There are some distortions. The lower inflation creates a negative that will come through in an IPE charge in this year, which we'll manage carefully. But you can see how the development of the store of value has happened, and you can see the components of life segment earnings on the right-hand side. I think a very, very good performance. Discovery Invest, I'll be very clear and very quick. I think it's been an excellent year. Very linear performance and excellent performance. Growth slows. Really, net flow is growing strongly. New business up 13%. Assets under management crossing ZAR 200 billion. Operating profit growing 9%.
Speaker #1: There are some distortions. The lower inflation creates a negative that will come through in an IFE charge this year, which we'll manage carefully.
Speaker #1: But you can see how the development of the store of value has happened, and you can see the components of Life segment earnings on the right-hand side.
Speaker #1: I think a very, very good performance. Discovery Invest—I'll be very clear and very quick—I think it's been an excellent year. Very linear performance, and excellent performance.
Speaker #1: Growth slows, but really net flow is growing strongly in new business, up 13%. Assets under management have crossed $200 billion. Operating profit is growing 9%. It's important to note that the previous period had a few one-offs from asset-liability management that created some one-off profits.
Adrian Gore: Really affected the previous period, had a few once-offs from asset liability management that created some one-off profits. If you took that out, the growth would have been 22%, which I think is kind of in line with what you would expect with growth in assets of that scale. So a very good performance. I'm very happy with that. Discovery Insure had a great year. Normalized profit up 24%. The call-out is just the operating margin growing to nearly 15%, and really an incredible performance from a loss ratio perspective. You can see gross new business up 2%. We need that to be higher. We need to grow off the space. But there's been a very strong focus on quality of new business over the last two years, and I think that's the right thing to do. But it really is a fantastic evidencing of how the model works.
Speaker #1: If you took that out, the growth would have been 22%, which I think is kind of in line with what you would expect, with growth in assets of, of, of, of that, of that scale.
Speaker #1: So a very good performance and very happy with that. Discovery Insure had a great year. normalized profit up 24%. The callout is just the operating margin growing to nearly 15%, and, and really a, a, an incredible, performance from a loss ratio ratio perspective.
Speaker #1: You can see gross new business is up 2%. We need that to be high—we need to grow off this base. But there's been a very strong focus on qualitative new business over the last two years.
Speaker #1: And I think that's the right thing to do. But it really is a fantastic evidencing of how the model works. It demonstrates it clearly.
Adrian Gore: It demonstrates it clearly. On the left-hand side, there is a focus with pricing about how the model works, and I think the value proposition is very special. So fully 90% of our clients coming in are superior risk profile. Once they come in and they engage, you can see the loss ratio has come down with increasing status. They drive better, claims come down. Then you get the selective relaxation effect. People that are engaged doing better tend to stay, and those who are not tend to leave. So over time, you get this mathematical issue of seeding the book with the right clients, the book getting better, losing the right clients, keeping the right clients, and you get this kind of effect on the loss ratio. The fact is, we are in a good underwriting cycle.
Speaker #1: On the left-hand side, there's a focus with pricing of how the model works. And I think the value proposition is very special. So, fully 90% of our clients coming in are superior risk profile.
Speaker #1: Once they come in and they engage, you can see the loss ratios come down with increasing status. So they drive better, claims come down.
Speaker #1: And then you get the selective levitation effect. People who are engaged, doing better, tend to stay, and those who aren't tend to leave. So over time, you get this mathematical issue of seeding the book with the right clients.
Speaker #1: The book is getting better—losing the right clients, keeping the right clients—and you get this kind of effect on the loss ratio. The fact is, we're in a good underwriting cycle.
Speaker #1: I think most of the property and casualty short-term insurers will publish good results. But I think if you look at the actual progression of the loss ratio, you can see that kind of linear effect.
Adrian Gore: I think most of the property and casualty short-term insurers will publish good results. But I think if you look at that actual progression of the loss ratio, you can see that kind of linear effect. It was not a great year from a weather perspective. We had the floods, in Cape Town, et cetera. Effectively, that did affect the numbers, but directionally, you can see the loss ratio has come down 30% over the last number of years to under 50%. I think an excellent performance in and of itself, but I think a great evidencing of how the Vitality shared value model is playing out in the context of insurer. Let me end on the Discovery South Africa composite. I think a great performance. The business is well-positioned.
Speaker #1: It wasn't a great year from a weather perspective. We had the floods in Cape Town, et cetera. And, effectively, that did affect the numbers, but, directionally, you can see the loss ratios come down, 30% over the last number of years, to under 50%.
Speaker #1: I think an excellent performance in and of itself, but I think a great evidencing of how the Vitality Shared Value model is playing out in the context of, of, of insurer.
Speaker #1: So let me end on the Discovery South Africa composite. I think it's a great performance. The businesses are well positioned. The primary strategy, which rolls out in a year, is really the real evolution of the superbank strategy.
Adrian Gore: The primary strategy, which rolls out in the year, is really the real evolution of a super bank strategy, and you will see that playing out across a number of dimensions. Let me turn to the global business Vitality. A very, very important year. This is seminal times for our globalizing of our capabilities. 18 months ago, we brought it all under one business, and the business now is focused in three areas. There are three distinct strategies based on those three areas. Number one, Vitality UK. Make it excellent, make it a leader in life and health insurance in the UK, and make it a center of excellence for all of our expansions. So all of the IP hubs, the technology, the R&D is taking place. It takes place throughout the group, but it is centered in the UK for the globalization of that IP.
Speaker #1: And you'll see that playing out across a number of dimensions. Let me turn to the global business vitality. A very, very important year. These are seminal times for the globalizing of our capabilities.
Speaker #1: Eighteen months ago, we brought it all under one business, and the business is focused in three areas. There are three distinct strategies based on those three areas.
Speaker #1: Number one: Vitality UK—make it excellent, make it a leader in life and health insurance in the UK, and make it a center of excellence for all of our expansion.
Speaker #1: So all of the IP hubs, the technology, the R&D is taking place—it takes place throughout the group, but it's centered in the UK for the globalization of that IP.
Speaker #1: Secondly, scale our global markets through partnerships and equity stakes. We brought all of our different pieces together. Vitality US, which is quite a small component in the structure now, is in this central, in the central management.
Adrian Gore: Secondly, scale our global markets through partnerships and equity stakes. We build all of our different pieces together. Vitality US, which is quite a small component, in the structure now, is in the central management, and the entire management is now done on a regional basis. Finally, Ping An Health, drive it to scale, continue to drive its expansion through products and distribution. It is an exceptional company. Keep their growth going. You can see the earnings at 21% was in the low side of the corridor, affected in ZAR by the currency on a like-like basis, as I made the point, 26%. So not far off the kind of midpoint of what we would have expected. Vitality UK had a tremendous year. It is really performing remarkably well. The team has done an unbelievable job.
Speaker #1: And the entire management is now done on a regional basis. And then finally, Payment Health will continue to drive its expansion through products and distribution.
Speaker #1: It's an exceptional company. Keep that growth going. You can see the earnings at 21%—that was on the low side of the corridor, affected in rands by the currency. On the like-for-like basis, as I made the point, it's 26%.
Speaker #1: So not far off the kind of midpoint of what we were of, of what we would have expected. Vitality UK had a tremendous year.
Speaker #1: It is really performing remarkably well. The team has done an unbelievable job. And again, I think it really is evidence of the Vitality shared-value model.
Adrian Gore: And again, I think it really is evidencing of the Vitality shared value model. At a composite level, normalized operating profit growing 52%, as you can see. The scale of the business is big, covering over 2 million lives, in the UK. It is a substantial player in the UK market. Let me turn to the two businesses within it. I think you will see the dynamics. The call-out in VitalityHealth is really the profit, up 65% to just under GBP 84 million. New business was up 4%. It is a complex market. There are two opposing forces. A very complex NHS that creates demand for private health insurance. On the other side, an environment of inflation and lack of affordability, lower economic growth, that makes affordability a problem. So you have these two issues, in a sense, kind of coalescing.
Speaker #1: At a commerce level, normalized operating profit grew 52%, as you can see. But the scale of the business is big, covering over 2 million lives in the UK.
Speaker #1: It's just a—it's just—it is a substantial player in the UK market. But let me turn to the two businesses within it.
Speaker #1: I think you can see the dynamics. The callout in Vitality Health is really the profit, up 65% to just under £84 million. New business was up 4%.
Speaker #1: It's a complex market. There are kind of two—there's two opposing forces: a very complex NHS that creates demand for private health insurance, and on the other side, an environment of inflation and lack of affordability, low economic growth, that makes affordability a problem.
Speaker #1: So you have these two issues, in a sense, kind of coalescing. We are focused very much on making sure we price, like, insure the business properly.
Adrian Gore: We are focused very much on making sure we price, making sure the business properly. Lives covered grew to just under 1.1 million. But if you look at the dynamics, and you saw this, I think, at the interims, a fantastic performance. And really, again, the same value chain that is driving the alpha. Pricing power and being very careful about the ability to actually get premium yield, despite the fact that claims have been going up significantly given more usage of private medical insurance and broader categorization of what is covered. You can see the strong correlation of causal effect as people engage in Vitality. Claims come down. Same effect on lapsation. We are keeping better lives and losing the less engaged. And then the effect on margin up to 9.2%. Above the 7.5% margin guidance we have given out there.
Speaker #1: Last covered grew to just under $1.1 billion. But if you look at the dynamics—and you saw this, I think, at the interims—a fantastic performance, and really, again, the same value chain.
Speaker #1: That is driving the alpha: pricing power and being very careful about the ability to actually get premium yield, despite the fact that claims have been going up significantly given, you know, more usage of private medical insurance and broader categorization of what is covered.
Speaker #1: You can see the strong correlation of causal effects—as people engage in vitality, claims come down. Same effect on lapse rates. We are keeping better lives and losing the less engaged.
Speaker #1: And then the effect on margin—up to 9.2%, which is above the 7.5% margin guidance we've given out there. I hope we can keep that margin and keep it sustainable.
Adrian Gore: I hope we can keep that margin and keep it sustainable. We would not do it at the expense of growth, but we are feeling confident about sustainability of profit, in VitalityHealth. VitalityLife had an exceptional period. The call-out there is the new business growth of 25%, as you can see. And the quality of the new business. The normalized profit, being released through IFRS 17 with a strong growth of 27%, covering now over 1 million lives in the UK. Again, I am making the same. I sound like a broken record, but it is the kind of repetitive. The repeatability of the model and how it plays out, just in different ways, comes through in the year-end review. This is a complex commoditized market using the dynamic pricing of the Vitality shared value model. Let us just be price competitive, but keep profitability where it should be.
Speaker #1: We wouldn't do it at the expense of growth, but we are feeling confident about the sustainability of profit in Vitality Health. Vitality Life had an exceptional period.
Speaker #1: The callout there is the new business growth of 25%, as you can see, and the quality of the new business. The normalized profit, Evo, you know, being released through IFRS 17 with a strong growth of 27%, now covers over a million lives in the UK.
Speaker #1: Again, I'm, you know, I'm making the same. I sound like a broken record, but it's the, the kind of repetitive the re the, the repeatability of the model and how it plays out.
Speaker #1: Just in different ways, it comes through in the year under review. So, this is a complex, commoditized market. Using the dynamic pricing of the Vitality Shared Value model, let's just be price competitive, but keep profitability where it should be.
Speaker #1: And so you see that, in the period under review, or over the last few years, the number of advisors selling for Vitality Life has grown by 77%.
Adrian Gore: So you see that in the period under review or over the last few years, the number of advisors selling for VitalityLife has grown by 77%. Market share has grown to just under 16%. Despite a very, very competitive suite of companies we compete with. You can see again the same correlation, causal effect on claims as people engage in Vitality. And then the value of new business on the right-hand side has climbed by 67%. It is a remarkable performance, and I think hard won by the team. You can see it on the second graph from the right. The profitability per policy has stayed as kind of where it is. So it is kind of flat in the black. So even with the growth, we are keeping the profitability there. So the pricing models of how the team are using the shared value model has been exceptionally effective.
Speaker #1: Market share has grown to just under 16%. It's quite a very, very competitive suite of companies we compete with. You can see, again, the same correlation—cause and causal effect—on claims as people engage in Vitality.
Speaker #1: And then the value of new business on the right-hand side has climbed by 67%. It's a remarkable performance, and I think hard won by the team.
Speaker #1: You can see on the second graph on the right, the profitability per policy has stayed at kind of where it is, so it's kind of flat in the black.
Speaker #1: So even with the growth, we're keeping the profitability there. So, the pricing models of how the team are using the shared value model have been exceptionally effective.
Speaker #1: It's really the volume that's driving expenses down per policy, driving up its value, of new business, as you see it coming in.
Adrian Gore: It's really the volume that's driving expenses down per policy, driving up this value of new business as you see it coming in. You see the, again, the IFRS 17 buildup of the store of value, the strong growth of 11%, driven really by the incredible value of new business coming through. In fact, exceeding the release to earnings, therefore you get this, the strong growth in store of value. We did not get the, of course, the interest rates have not, interest long-term rates in the UK have not come down. So that is not an effect in this regard. Let me turn to Vitality Global Markets, I made the point now that we brought all of our businesses and focus into one that's managed now regionally, which I think is very, very powerful. This is a considerable opportunity for us, we believe.
Speaker #1: And then you see again, the IFRS 17 buildup of the store of value—a strong growth of 11%, driven really by the incredible value of new business coming through.
Speaker #1: In fact, exceeding the release to earnings. And therefore, you get this, the strong growth, in, in store of value. We did not get the of course, the interest rates have not interest long-term rates in the UK have not come down.
Speaker #1: So that is not a, a, a fact in this in this regard. Let me turn to vitality global markets. And I've made the point now that we brought all of them, all of our businesses and focus into one that's managed now regionally, which I think is very, very powerful.
Speaker #1: This is a considerable opportunity for us, we believe. It's not simple. We set a target of getting to $80 to $100 million of earnings by 2029.
Adrian Gore: It's not simple. We set a target of getting to USD 80 to USD 100 million of earnings by 2029. We remain confident of it. But it's lumpy and not linear. There's a lot of activity taking place in the business. If you look at the faceplate, I made a point about the yen depreciation. We have a large contract asset inside Sumitomo Life. It's a fantastic partnership of real value. But in Japan, interest rates went up and the yen went down. The effect on that asset came through the P&L. So without that effect, we would have seen a considerable growth, in Vitality Global Markets. But the number is small. You can see. We've got to grow significantly to get to that USD 80 to USD 100 million of profit. But there's considerable activity, and we remain confident we can do that.
Speaker #1: We remain confident of it, but it's lumpy and not linear. There's a lot of activity taking place in the business. If you look at the face plate, I made a point about the yen.
Speaker #1: The yen depreciation, we have a large contract asset inside Sumitomo Life. It's a fantastic partnership of real value. But in the U but in Japan, interest rates went up and the yen went down.
Speaker #1: The effect on that asset came to the P&L. So, without that effect, we would have seen considerable growth in Vitality Global Markets. But the number is small.
Speaker #1: You can see we've got significant growth required to get to that $80 to $100 million of profit. But there's considerable activity, and we remain confident we can do that.
Speaker #1: Revenue came down again—the effect of, of, of currency. But our partners are growing, up 10%. Live’s growing, up 16%, to just under 10—under $10 million.
Adrian Gore: Revenue came down again, the effect of currency, but our partners are growing at 10%. Lives growing at 16% to just under 10 million. There are four strategies, I outlined them at the last presentation. I want to just take you through them. They are getting, I think, more intense with more activity as we go forward. The first is deepening the proposition of Vitality AI. I made the point we launched in London. We are two weeks from a launch in New York on intensifying its capability. We are focusing a lot on our existing partners. A lot of work has taken place with our key partners to scale them. We are pursuing new opportunities in Europe, in Middle East and other markets, and we are focusing now hard on the US. We made the point at previous announcements, US was a small business.
Speaker #1: There are four strategies, and I—I outlined them at the last presentation. I want to just take you through them, and they are getting, I think, more intense with more activity as we go forward.
Speaker #1: The first is deepening the proposition of Vitality AI. I made the point we launched in London. We are two weeks from a launch in New York on intensifying its capability.
Speaker #1: We are focusing a lot on our existing partners, and a lot of work has taken place with our key partners to scale them. We are pursuing new opportunities in Europe, in the Middle East, and other markets.
Speaker #1: And we are now focusing hard on the US. We made that point at previous announcements. The US was a small business; we had to bring it to profitability in 2027.
Adrian Gore: We had to bring it to profitability in 2027. We're on track to do that, but we've made a further acquisition and we're pushing hard in the US and have confidence about what we can achieve. Let me give you some insight. Firstly, I'm not going to go into too much detail on this, but Vitality AI being launched in due time in the US is, I think, a considerable step forward. It really takes the work we've done with Google and Gemini into this Personal Health Pathways that is significantly comprehensive from kind of wellness, physical activity through to disease management. It is incredibly complex with very low rates of error. We are very confident about the type of personalization.
Speaker #1: We're on track to do that, but we made a further acquisition and we're pushing hard in the UK. And I have confidence, in the US and I have confidence about what we can achieve.
Speaker #1: Let me give you some insight. Firstly, I'm not going to go into too much detail on this, but Vitality AI being launched in two weeks' time in the US is, I think, a considerable step forward.
Speaker #1: It really takes the work we've done with Google and Gemini into this personal health pathway that is significantly, significantly comprehensive, from wellness and physical activity through to disease management.
Speaker #1: It is incredibly complex, with very low rates of error. We are very confident about a type of personalization. It gives rise to a set of statuses, from Blue through to Diamond.
Adrian Gore: It gives rise to a set of statuses from blue through to diamond, as you always hear, but now egalitarian, scientific, a real proper proxy, legally in every respect for how people manage their healthcare regardless of their state of health. We now have a global network of partners, incentive and reward partners linked to our statuses. Critically, this is the proposition, there are different ways because the model of paying for life insurance, dynamic pricing and for health insurance, flexing contributions in a careful way. We can demonstrate on the back of this, again, the Alpha EX, SX, the ability to offer this. That launch in the US will be to health plans, and that is very, very important to our business. Globally, all of these assets, of course, are rolled out globally. Important step we are taking.
Speaker #1: As you always have, but now egalitarian, scientific—a real, proper proxy legally in every respect for how people are managing their healthcare, regardless of their state of health.
Speaker #1: We now have a global network of partners, incentive and reward partners, linked to our statuses. And critically—and this is the proposition—there are different ways because the model of paying for life insurance, dynamic pricing, and for health insurance, flexing contributions in a careful way.
Speaker #1: And we can demonstrate, on the back of this, again, the Alpha EXS accessibility to offer this. And that launch in the US will be to health plans.
Speaker #1: And that's very, very important—to our business and globally. All of these assets, of course, are rolled up globally. It's an important step we're taking. The second is working on our existing partners and finding new partners in growth.
Adrian Gore: The second is working on our existing partners and finding new partners in growth. There has been a frenetic amount of activity in that regard. As you can see, our partners are growing over time. John Hancock continues to grow. Sumitomo Life grew by 10%. AIA came down by 10%. In Thailand, there was a reduction in new business. There was a flurry of health policies sold in the previous period due to change in regulation. We expect that to grow. You can see strong growth of our smaller partners. The US has grown nicely by 22%, and Amplify now has actually grown in getting some traction inside AIA. Across the board, I think really, really good activity. We are working hard on new partners with a strong pipeline building up. There are two opportunities now that are kind of in finalization.
Speaker #1: There's been a frenetic amount of activity in that regard. You can see our partners are growing over time. John Hancock continues to grow. Sumitomo Life grew by 10%.
Speaker #1: AIA came down by 10%. In Thailand, there was a reduction in new business. There was a flurry of health policies sold in the previous period due to changes in regulation.
Speaker #1: We expect that to grow. You can see strong growth from our smaller partners. The US has grown nicely by 22%. And Amplify has actually grown and is gaining some traction inside AIA.
Speaker #1: So across the board, I think really, really good activity. We're working hard on new partners with a strong pipeline building up. There are two opportunities now that are kind of in finalization.
Speaker #1: One has come through, which is our acquisition of Icario, but hopefully others will follow. The US is, for us, very exciting. We've been very, very careful in the US market, focusing firstly on employers with the Vitality model, then selling to health plans.
Adrian Gore: One has come through is our acquisition of Icario, but others hopefully will follow. The US is, for us, very exciting. We have been very, very careful in the US market, focusing firstly on employers with the Vitality model, then selling to health plans. We have made careful targeted acquisitions. WellSpark we did in November 2024, Rampart did in March 2026. We absorbed them, I think, very nicely. They bring both client base and they bring specific capabilities to add into our Personal Health Pathways capability. Icario is a fantastic company we are proud to have acquired. We acquired it for $47 million, literally closing the acquisition in the last number of weeks. Icario is a company that focuses on government business, so Medicare Advantage, Medicaid.
Speaker #1: We have made careful, targeted acquisitions—while Spark, we did in November '24, and Ramp in March '26. We resolved, I think, very nicely. They bring both client base and specific capabilities to add into our personal health pathway capability.
Speaker #1: Icario is a fantastic company. We are proud to have acquired it. We acquired it for $47 million, literally closing the acquisition in the last number of weeks.
Speaker #1: Icario is a company that focuses on government business, so Medicare Advantage and Medicaid. It brings a whole range of assets that can be used to bring us into that market.
Adrian Gore: It brings a whole range of assets that can be used, drags us into that market, as you can see in the middle of the chart. That creates a much, much greater addressable market for us. $130 billion of fees in that market that we can be a leader in. We need to work hard to do that. On the other hand, it brings some substantial clients and capabilities into our existing market. On both sides, we think it offers great capability. You can see what is happening in the US. By the end of 2026, in this reporting period, we covered 3.6 million lives and revenue of about $40 million. Going in now after all of these changes, total lives covered over 18 million with a revenue of $120 or $115 million. The US has really got a lot more scale.
Speaker #1: As you can see in the middle of the chart, that creates a much, much greater addressable market for us—$180 billion, $130 billion of fees in that market—that we can be a leader in.
Speaker #1: We need to work hard to do that. On the other hand, it brings some substantial clients and capabilities into our existing market.
Speaker #1: So, on both sides, we think it offers great capability. You can see what's happening in the US. By the end of 2026, in this reporting period, we covered 3.36 million lives, had revenue of about $40 million. Going in now, after all of these changes, total lives covered is over 18 million, with revenue of $120 or $115 million.
Speaker #1: So, the US has really got a lot more scale. We have got another partner in health equity, the largest health savings account player in the US, and are working very hard with them.
Adrian Gore: We have got another partner in HealthEquity, the largest health savings account player in the US, and are working very hard with them. A lot is taking place in the US market. Excited by that potential. I think this has been a seminal period for the US and part of our growth strategy going forward. Let me turn to Ping An Health and just end off there. I think the performance of Ping An Health has been absolutely tremendous. You can see the growth, really strong operating results pre-tax at 31% to RMB 3.3 billion of profitability. Our 25% share after tax at 14% to over RMB 545 million. Considerable scale of the business. I made the point about new business reversing. I will touch on that in a moment. This is a big business covering over 35 million lives.
Speaker #1: So, a lot is taking place in the US market, and I'm excited by that potential. I think this has been a seminal period for the US, and it's part of our growth strategy going forward.
Speaker #1: Let me turn to Ping An Health and just end off there. I think the performance of Ping An Health has been absolutely tremendous. You can see the growth is really strong, operating results pre-tax, a 31% to $3.3 billion of profitability.
Speaker #1: Our 25% share, after tax, is 14%, to over 545 million RMB. That's a considerable scale for the business. I made the point about new business reversing.
Speaker #1: I'll touch on that in a moment. This is a big business, covering over 35 million lives. You can see the size of the balance sheet—over RMB 15 billion.
Adrian Gore: You can see the size of the balance sheet, over RMB 15 billion. The business is highly cash generative and solvent. It has paid a dividend to Discovery at 25% of over ZAR 0.5 billion. I think a fantastic performance, in the case of Ping An Health. Just to repeat, at the H1, at the end of the calendar year, Ping An Health lost the use of the Ping An Life distribution channel. We were very concerned about the effect of new business. The team has worked incredibly hard and quickly. They have diversified products. Apart from e Sheng Bao, which was really the mainstream product being sold through the Ping An Life channel, we diversified into other high-value products, specific segment, specific special disease products that have done remarkably well. You can see from the chart, different distribution channels that are already growing strongly.
Speaker #1: The business is highly cash generative and solvent. It's paid a dividend to Discovery—our 25% share—of over half a billion rand. So I think a fantastic performance, in the case of Ping An Health.
Speaker #1: just to re just to repeat at the at the half year at the end of the calendar year, ping on health lost the use of the ping on life distribution channel.
Speaker #1: We're very concerned about the effect of new business. The team is worked incredibly hard and quickly. They've diversified products. So in the past, Isheng Bao, which was really the, the, the, the mainstream product being sold through the ping on life channel, we diversified into other high value products specific segment, specific special disease products that have done remarkably well.
Speaker #1: And you can see from the chart the different distribution channels that are really growing strongly. So the effect on sales was a lot less—on new business, was a lot less than we thought.
Adrian Gore: The effect on sales was a lot less, and new business was a lot less than we thought. I think excitingly, Huli Go, which is Vitality Go now, is a focus of the company to attach that to their product. Directionally, the business model is getting into China in the right way. The work done by the Ping An Health team has been remarkable. To call out Ping An Group, they have been remarkably supportive over this period of this change, which could have been very, very significant and has not been. I think that is important. Then to make the point, we remain bullish about the opportunity in China. It is a lower growth environment than it was, but all of the directional issues, regulation, et cetera, is about promoting private health insurance.
Speaker #1: And I think, excitingly, Huligo—which is Vitality Go now—is a focus of the company to attach that to their product. So, directionally, the business model is kind of getting into China in the right way.
Speaker #1: The work done by the Ping An Health team has been remarkable. And to call out Ping An Group, they've been remarkably supportive over this period of change, which could have been very, very significant and hasn't been.
Speaker #1: I think that's important. And then, to make the point, we remain bullish about the opportunity in China. It is a lower-growth environment than it was, but all of the directional issues—regulation, etc.—are about promoting private health insurance.
Speaker #1: When you look at the dynamics on the ground—the growing middle class, and all the pressures I mentioned before—all those directions point to a growing private health insurance market.
Adrian Gore: When you look at the dynamics on the ground, growing middle class, all the pressures I mentioned before. All those directions point to a growing private health insurance market. Ping An is growing. Its market share now covers more than 10%. Strong premium growth, as you can see. It is a significant company with nearly RMB 20 billion of premiums. I think an amazing performance. Let me summarize. We will end there. On the Vitality Global business, a frenetic year of considerable activity. We remain confident about its ability to meet its profit targets. A lot to be done. Not simple, not linear, but very exciting. Next big step in New York in 2 weeks' time, and we will see how that receptivity plays out. Let me summarize before I hand over to questions. I think an excellent year.
Speaker #1: Ping An is growing. Its market share now covers more than 10%. Strong premium growth, as you can see. It's a significant company with nearly RMB 20 billion of premium.
Speaker #1: So I think an amazing, amazing performance. So let me summarize, or end there, on the Vitality global business—a frenetic year of considerable activity.
Speaker #1: We remained confident about its ability to meet its profit targets. A lot to be done, not simple, not linear, but very, very exciting. Next big step in New York in two weeks' time, and we'll see how that reset it, receptivity plays out.
Speaker #1: So let me summarize before I hand over to questions. I think it's been an excellent year. We are inside or ahead of our growth corridor that we set, and our cash conversion ratio is better than expected.
Adrian Gore: We are inside or ahead of our growth corridor that we set. Cash conversion ratio better than expected. I think a very rational use and allocation of capital and normalized ROE coming up nicely. I hope the clarity around the strategy, the super bank of Vitality, is clear, manifesting. I think it is strong, composite businesses that are differentiated, purpose-built, close to our values, and have considerable growth potential going forward. That is my presentation. I have been joined by all of our key executives here who will take questions. We are here in the room and online. I have Deon Viljoen, our CFO, with me, David Danilowitz, our Head of Strategy and of Investor Relations here as well. David, I am going to hand over to you, I think, to take questions. If I can, David, to you.
Speaker #1: I think a very rational use and allocation of capital and normalized ROE are coming up nicely. I hope the clarity around the strategy—the super-bank of Vitality AI—is clearly manifesting. I think it's strong: we compensate businesses that are differentiated, purpose-built, close to our values, and have considerable growth potential going forward.
Speaker #1: That is my presentation. I've been joined by all of our key executives here, who will take questions. We are here in the room and online.
Speaker #1: I've dealt for Luna, our CFO, and with me, David Danilovic, our Head of Strategy and of Investor Relations, is here as well. So David, I'm going to hand over to you.
Speaker #1: I think I'll take questions, if I can. David, to you.
Speaker #2: Great. Adrian, thank you very much. Again, just a reminder for all participants: please load up questions as you go. We'll go through them sequentially.
David Danilowitz: Great, Adrian. Thank you very much. Again, just a reminder for participants, please load up questions as you go. We will go through them sequentially. I am going to start off with the first question, which comes from Sena Mele from SBG. Sena, thank you so much. I will read the question. The question is for Hylton. Well done on a very strong year for the bank. What are the key milestones investors should monitor between the current profitability level and the longer-term earnings ambition for the bank?
Speaker #2: I'm going to start off with the first question, which comes from Senamela from SBG. Senamela, thank you so much. I'll read the question. The question is for Hilton.
Speaker #2: Well done on a very strong year. For the bank, what are the key milestones investors should monitor between the current profitability level and the longer-term earnings ambition for the bank?
Speaker #3: Yeah, thanks. Thanks for the question. the I think we've been pretty explicit in terms of the, the, the FY 29 ambition. of 2 million clients and, and 3 billion rand of, of operating profit before new business acquisition costs.
Hylton Kallner: Well, thanks for the question. I think we have been pretty explicit in terms of the FY29 ambition of 2 million clients and ZAR 3 billion of operating profit before new business acquisition costs. I think those remain the key metrics, and through the interim period as well. Through the period now, we are at approximately 1.6 million clients. I think that remains probably the key lead indicator as we move towards the ambition. But the growth in new business, or profit before new business acquisition costs increased by ZAR 497 million this year. It was about ZAR 100 million ahead of the sort of the ZAR 400 million annual profit progression that we have been targeting and resulted in a profit of ZAR 865 million, kind of getting towards the ZAR 1 billion profit before new business acquisition costs.
Speaker #3: so I think those, those remain the, the kind of the key, the key metrics. and through the interim period as well. So through the period now, we, we're at approximately 1.6 million clients.
Speaker #3: I think that we and that remains probably the key kind of lead indicator as we, as we, as we, as we move towards the, the ambition.
Speaker #3: but the, the growth in new business, profit before new business acquisition costs increased, 497 million rand this year. So it was, it was about 100 million ahead of, of the, the sort of the 400 million, annual profit progression that we've been targeting.
Speaker #3: And, and resulted in a profit of 865 million, kind of getting, getting towards the billion rand profit before new business acquisition costs. Bearing in mind that the bank is incurring, a, a, a significant new business strain as we grow and the, the kind of the rate of growth, accelerate.
Hylton Kallner: Bearing in mind that the bank is incurring a significant new business strain as we grow and the rate of growth accelerates. Those remain, I think, the two key indicators, the milestones that we will continue to track. And then obviously, I think the product and super bank platform rollout that Adrian spoke to. And that later this year, I think will start to emerge strongly and will be a key kind of entry point into phase 2 of the bank. So those will probably be the three areas that we will be focusing on.
Speaker #3: So those, those remain, I think, the kind of the two key indicators. the milestones that we'll continue to track. And, and then obviously, I think the kind of the product, and, and, super bank, platform rollout that, that, that Adrian, that Adrian spoke to.
Speaker #3: And that later this year, I think we'll start to emerge strongly and will be a key, a key kind of entry point into phase two of the bank.
Speaker #3: So those would probably be the, kind of, the three areas that we'll be focusing on.
Speaker #2: Great. Thanks—thanks, Hilton. Sena had another question. This is for Neville, on Vitality Health. I'll read the question to you, Neville: How sustainable are the Vitality Health margin gains?
David Danilowitz: Great. Thanks, Hilton. Sena had another question. This is for Neville on VitalityHealth. I will read the question to you, Neville. How sustainable are the VitalityHealth margin gains, and what is the normalized margin outlook?
Speaker #2: And what is a normalized margin outlook?
Speaker #3: Thanks for the question, David. I think, as Adrian said, the shared value model has been significant and, for us, very, very profitable from a margin perspective.
Neville Koopowitz: Thanks for the question, David. I think as Adrian said, the shared value model has been significant in us, very, very profitable from a margin perspective. Our guidance, as you know, has been a 7.5% margin. The market is, as Adrian said, is quite a challenge at the moment from an economic perspective. But there is no reason to believe that we will not be able to deliver the market guidance of our 7.5%, and hopefully we could outperform this. Very importantly, it gives us options in terms of profit growth versus lives and revenue growth.
Speaker #3: our guidance, as you know, has been a seven and a half percent margin. the market is, as Adrian said, is, quite, challenging at the moment from an economic perspective.
Speaker #3: But there's no reason to believe that we won't be able to deliver. The market guidance of our 7.5%, and hopefully, we could outperform this.
Speaker #3: Very importantly, it gives us options in terms of, you know, profit growth versus lives and revenue growth, and we're going to use those opportunities from a strategic perspective to see how we can grow the business on a sustainable basis.
Neville Koopowitz: We are going to use those opportunities from a strategic perspective to see how we can grow the business on a sustainable basis.
Speaker #2: Great, thank you, Neville. The next question is for Rion on Discovery Life. It comes from Tapelo from Investec. Rion, the question is: solvency for the life business is down to 1.7 times.
David Danilowitz: Great. Thank you, Neville. The next question is for Riaan on Discovery Life. It comes from Thapelo from Investec. Riaan, the question is, solvency for the life business is down to 1.7 times. What drove that, and what is your target for this?
Speaker #2: What drove that? And what is your target for this?
Speaker #4: Good morning.
Riaan van Reenen: Good morning. The issue of coverage reduced to 1.7 times, and I think it is still significantly above our risk appetite levels is the first point to make. The key reasons for this slight reduction in the solvency margin were lower yields in South Africa, as well as optimizing our cost of reinsurance. I think, in short, we have got significant headroom in both our current solvency as well as liquidity positions, and they are both way above our risk appetite levels.
Speaker #3: The issue or coverage reduced to 1.7 times. And I think it's still significantly above our risk appetite levels, is the first point to make.
Speaker #3: The key reasons for this slight reduction in the solvency margin were lower yields in South Africa, as well as optimizing our cost of reinsurance.
Speaker #3: So I think, in short, we've got significant headroom in both our current solvency as well as liquidity positions, and they are both way above our risk appetite levels.
Speaker #2: Thank you. Moving on, Tapelo had a follow-up as well. This is for Andy. The question is, how should we think about the financial leverage move from here?
David Danilowitz: Thank you. Moving on, Thapelo had a follow-up as well. This is for Andy. The question is: how should we think about the financial leverage move from here? Do you want to take it closer to 10% at the bottom of the target range or close to the midpoint being more appropriate?
Speaker #2: Do you want to take it closer to 10% at the bottom of the target range, or is close to the midpoint more appropriate?
Speaker #4: I think there are two or three points to make on this. The first is that you will naturally see a drift downwards, hopefully, in the financial leverage ratio.
[Company Representative] (Discovery): Well, I think two or three points to make on this. The first is that you will naturally see a drift downwards, hopefully, in the financial leverage ratio if nothing else changes, because the equity should grow in the group. You are naturally going to see a decline in the leverage ratio. The second point to make is that we will continue to optimize the use of debt and the cost of that debt as we have very successfully in the past year. That could be just managing the cost of different facilities or the use of debt for other purposes. I think the third point to make is that it is really building on Adrian's point around the whole financial framework of the group giving us the improved cash generation, the growth in the business, and the group giving us increased financial flexibility.
Speaker #4: If nothing else changes because the equity should grow in, in the, in the group. so we'd, you, you'd naturally gonna see a decline in the leverage ratio.
Speaker #4: The second point to make is that we'll continue to optimize the use of debt, and the cost of that debt, as we have very successfully in the past year.
Speaker #4: So that could be just managing the cost of different facilities, or the use of debt for other purposes. I think the third point to make is that it's really building on Adrian's point around the whole financial framework of the group, giving us improved cash generation, the growth in the business and the group, and giving us increased financial flexibility.
Speaker #4: And you'll see, as and when opportunities arise, that gives us the freedom to use debt to execute on opportunities. And they may well arise in the future. The best example in the last 12 months is the opportunity it gave us to execute on the One Discovery Place building purchase.
[Company Representative] (Discovery): You will see as and when opportunities arise, that gives us the freedom to use debt to execute on opportunities. They may well arise in the future. I mean, the best example in the last 12 months is the opportunity it gave us to execute on the 1 Discovery Place building purchase. You can see with that, we are still hovering around the middle of the range. I think that is really the best way to think of it.
Speaker #4: And you can see with that, we're still hovering around the middle of the range. So I think that's really the best way to think of it.
Speaker #2: Great, thank you. The question from—sorry, question from Jaco first, from Citywire. This question's for Dion. Good morning, this is a question around Discovery Invest.
David Danilowitz: Great. Thank you. A question from Jaco Visser from Citywire. This question is for Deon. Good morning. This is a question around Discovery Invest. The question is: what exactly does the 81% of linked assets invested in Discovery funds represent, and how much further can that penetration realistically rise?
Speaker #2: The question is: What exactly does the 81% of linked assets invested in Discovery funds represent? And how much further can that penetration realistically rise?
Speaker #5: Thank you, David, and thanks for the question, Jaco. Good morning, everybody. Of the unit-linked assets under management on our platform, of the total platform, we have about $180 billion of assets on the platform.
Deon Viljoen: Thank you, David, and thanks for the question, Jaco. Good morning, everybody. Of the unit-linked assets under management on our platform, of the total platform, we have about ZAR 180 billion of assets on the platform. The 81% represents the assets that are actually under management in our own funds. The remainder will be with external asset managers. We have always reflected that kind of level of penetration. We are quite comfortable at that level because ultimately it is driven by the needs of individual clients. So, it is largely driven by that balance.
Speaker #5: The 81% represents the assets that are actually under management in our own funds. The remainder will be with external asset managers. And we've always sort of reflected that kind of level of penetration.
Speaker #5: We’re quite comfortable at that level because ultimately, it's driven by the needs of individual clients. So, you know, it's largely driven by that balance.
Speaker #2: Excellent. The next question, back to Hilton, is coming from Marco Cristellis from UBS. Hilton, the question is: The bank has been successful in bringing a large number of new Discovery customers. To what extent have you been successful in selling other Discovery products to these customers?
David Danilowitz: Excellent. The next question, back to Hylton, coming from Michael Christelis from UBS. Hylton, the question is: the bank has been successful in bringing a large number of new Discovery customers. To what extent have you been successful in selling other Discovery products to these customers?
Speaker #3: Yeah, thanks, David. And thanks, Marco. the, you know, I think we just, we just starting that, that, that process. and we're seeing excellent traction, early on.
Hylton Kallner: Yeah. Thanks, David, and thanks, Michael. I think we are just starting that process, and we are seeing excellent traction early on. The time period to the first, second, third Discovery product, for new to bank and new to group clients, is about a third of what we are observing in other product entry points into the group. So, the adoption and take-up of the next Discovery product for bank clients, where bank is the entry point, is significantly quicker. We really are only starting that process now, and I think that is very much the focus and the potential and opportunity in the super bank strategy. Bear in mind that 70% of new to bank clients are completely new to the group as well. So about 1,000 clients joining the bank every day are only bank clients.
Speaker #3: the, the time period to the first, second, third, Discovery product, for new to bank and new to group clients. is about a third of what we're observing in other product entry points in, into, into the group.
Speaker #3: So, so the kind of the, the adoption and take up of the, the, the next Discovery product for bank clients where bank is the entry point, is significantly quicker.
Speaker #3: we, we really are only starting that process now. And I think that is, that's very much the, the, the, the focus and the potential and the opportunity.
Speaker #3: in, in, in the super bank strategy. bear in mind that, 70% of, of new to bank clients, are completely new to the group as well.
Speaker #3: So about 1,000 clients joining the bank every day, are only bank clients. And so that, that is obviously the, the, the, the real opportunity in terms of, in terms of the, the new business strategy, and integration for the rest of, for the rest of the South African group.
Hylton Kallner: That is obviously the real opportunity in terms of the new business strategy and integration for the rest of the South African group.
David Danilowitz: Thank you. Michael has a follow-up, and in fact, it aligns with the question from Warwick from RMB Morgan Stanley. From Michael and Warwick, I will bring it together. What is the medium-term outlook for mortality profits in South Africa, given the strong variances seen across the sector? To what extent do you expect these to normalize over time? Warwick's alignment of that question, I think really very similar. Riaan, over to you for the mortality question.
Speaker #2: Thank you. Marco has a follow-up, and in fact, it aligns with the question from Warwick at R&B Morgan Stanley. So, from Marco and Warwick, I'll bring it together.
Speaker #2: What is the medium-term outlook for mortality profits in South Africa, given the strong variances seen across the sector? To what extent do you expect these to normalize over time?
Speaker #2: Warwick's alignment to that question, I think, is really very similar. So Rion, over to you for the mortality question.
Speaker #3: Thank you. It's a great question. So I think, as Adrian has outlined in the slides, the past period has seen a significantly lower claims experience and engaged lives, with much stronger correlation compared to what we've seen in the past.
Riaan van Reenen: Thank you. That is a great question. I think that as Adrian has outlined in the slides, the past period has seen a significantly lower claims experience at engaged lives, much stronger correlation compared to what we have seen in the past. We have also seen that older ages, specifically above age 50, had significantly better experience in the individual Life book. I think this link between better experience at Engaged Life, the dynamics of a shared value model playing out, and also seeing better experience at older ages is very encouraging, considering the aging of an in-force book. We are quite optimistic about future trends given these observations. There is obviously some short-term volatility that we will need to account for, but these trends are emerging incredibly strongly.
Speaker #3: And we've also seen that older ages, specifically above age 50, had significantly better experience in the individual life book. So I think this link between better experience at engaged life, the dynamics of a shared value model playing out, and also seeing better experience at older ages is very encouraging, considering the aging of an enforced book.
Speaker #3: So, we're quite optimistic about future trends, given these observations. There's obviously some short-term volatility that one needs to account for, but, you know, these trends are emerging incredibly strongly.
Speaker #2: Thanks, Rion. Over to Neville. It's a follow-up from Warwick from R&B, Morgan Stanley. How should we think about the shape of the Vitality AI and Vitality Global central cost for the next two years?
David Danilowitz: Thanks, Riaan. Over to Neville. It is a follow-up from Warwick, from RMB Morgan Stanley. How should we think about the shape of the Vitality AI and Vitality Global central cost for the next two years? You mentioned increasing the intensity of expansion, especially in the US. Do costs accelerate, or was FY2026 a peak spend period?
Speaker #2: You mentioned increasing the intensity of expansion, especially in the US. Do costs accelerate, or was FY26 a peak spend period?
Speaker #4: Thanks. Thanks, Warwick, for the question. I think, very importantly, there is going to be continued spend in the vitality AI capabilities.
Neville Koopowitz: Thanks, Warrick, for the question. I think very importantly, there is going to be continued spend in the Vitality AI capabilities, as well as the capabilities across the business. We are very, very confident, however, that these capabilities are going to result in us closing partnership deals over a period of time that will be significant from a revenue generation perspective with high margins. I think it is important to understand that it is a long sales cycle, but our current partnerships that we have got in place, through AIA, John Hancock, Sumitomo Life, have been going for more than 10 years. So the ability to actually lock in partners for a long period of time with our capabilities is significant. So in essence, we are building a significant capability for growth.
Speaker #4: as well as the capabilities across the business. We are very, very confident, however, that these capabilities are going to result in us closing partnership deals.
Speaker #4: Over a period of time, that will be significant from a revenue generation perspective, with high margins. I think it's important to understand that it is a long sales cycle.
Speaker #4: But our current partnerships that we have in place through AIA, John Hancock, and Sumitomo Life have been going for more than 10 years. So, the ability to actually lock in partners for a long period of time with our capabilities is significant.
Speaker #4: So, in essence, we are building a significant capability for growth. As Adrian mentioned, this could be lumpy, but we are very, very confident that we'll be able to implement these partners at a marginal cost from a relatively fixed cost base.
Neville Koopowitz: As Adrian mentioned, this could be lumpy, but we are very confident that we will be able to implement these partners at a marginal cost, from a relatively fixed cost base. But in the near term, there will be additional expenses related to Vitality AI as we continue to evolve the very powerful proposition that is resonating exceptionally well across the globe.
Speaker #4: But in the near term, there will be additional expenses related to Vitality AI as we continue to evolve the very powerful proposition that is resonating exceptionally well across the globe.
Speaker #2: Next question comes from Harry Burter. This is for Andy. Harry Burter from Bank of America Securities. Other than dividends, how should we think about excess capital allocation going forward, given the US growth strategy?
David Danilowitz: Next question comes from Harry Botha. This is for Andy. Harry Botha from Bank of America Securities. Other than dividends, how should we think about excess capital allocation going forward, given the US growth strategy? Does the bank require further capital from the group?
Speaker #2: Does the bank require further capital from the group?
Speaker #3: Thanks again, David, and thanks, Harry, for the question. So just to answer your question, the bank doesn't really require any material capital from the group for its development from this point onwards.
[Company Representative] (Discovery): Thanks again, David, and thanks, Harry, for the question. Just to answer your question, the bank does not really require any material capital from the group for its development from this point onwards. You can see it is very cash generative, and the profit signature has turned now. So that is not going to be, in any way, a drain on the group's capital resources. I think we will just really stick to the framework that we have outlined for you quite clearly, which is this financial flexibility gives us three areas. We can manage the levels of debt, we can manage the level of the dividend, and we can keep our powder dry for future development growth opportunities. So I think that that is really where we will be focusing.
Speaker #3: You can see it's very cash generative, and the profit signature has turned now. So, that's not going to be in any way a drain on the group's capital resources.
Speaker #3: I think we're just really stick to the, the framework that we've, we've, we've outlined for you quite clearly, which is there's financial flexibility gives us three areas we can, manage the levels of debt, we can manage the level of the dividend, and, we can keep our powder dry for future development growth opportunities.
Speaker #3: so, so I think that, that, that, that's really where we'll be, be focusing.
Speaker #2: Great. Thank you, Andy. Harry has a follow-up, follow-on question related to, to Ping An Health. We've got to move over to David Ferreira. David, the question is, in Ping An Health, can underlying earnings offset the normalization of exceptional investment gains going forward?
David Danilowitz: Great. Thank you, Andy. Harry has a follow-on question related to Ping An Health. We are going to move over to David Ferreira. David, the question is: In Ping An Health, can underlying earnings offset the normalization of exceptional investment gains going forward?
Speaker #5: Thank you very much for the question, Harry, and greetings from Shanghai. So, the simple answer is that, while there's clearly uncertainty around investment returns going forward, yes, base case, we do expect that net profit after tax will equal or will exceed these fiscal year '26 levels in future fiscal years.
David Ferreira: Thank you very much for the question, Harry, and greetings from Shanghai. The simple answer is that while there is clearly uncertainty around investment returns going forward, yes, base case we do expect that net profit after tax will equal or will exceed these fiscal year 2026 levels in future fiscal years.
Speaker #2: Great, David. Thanks for joining. In fact, we'll come back to you with a question from Baron regarding Ping on Health. The question is: What is your financial year '27 outlook for new business growth after the distribution changes that impacted this current year?
David Danilowitz: Great, David. Thanks for joining. In fact, we will come back to you. A question from Baron regarding Ping An Health. The question is: What is your financial year 2027 outlook for new business growth after the distribution changes that impacted this current year?
Speaker #5: Thanks, Baron, for the question. So again, the short answer is that, as you heard from Adrian, new channels and products are picking up fast, and we estimate that the fiscal year 2027 growth compared to fiscal year 2026 will most likely be in a range of between 9% and 20%, measured in RMB, the Chinese currency.
David Ferreira: Thanks, Baron, for the question. Again, the short answer is that, as you heard from Adrian, new channels and products are picking up fast, and we estimate that the fiscal year 2027 growth compared to fiscal year 2026 will most likely be in a range of between 9% and 20%, measured in RMB, the Chinese currency.
Speaker #2: David, I'm going to stick with you to keep things working well. So, this question comes from Tej from O Capital. It goes, "Hi team, thanks for the presentation."
David Danilowitz: David, I am going to stick with you. It is working well. This question comes from Tej, from White Oak Capital. It goes, "Hi, team. Thanks for the presentation. Could you kindly elaborate on the disruption of distribution via Ping An Life license? Was this a company decision or was it regulatory?
Speaker #2: Could you kindly elaborate on the disruption of distribution via Ping on the life license? Was this a company decision, or was it regulatory?
Speaker #5: Thanks for the question, Tej. We communicated some of this six months ago. It was ping on Groups and ping on Life's response to views that had been expressed by the regulator.
David Ferreira: Thanks for the question, Tej. We communicated some of this 6 months ago. It was Ping An Group's and Ping An Life's response to views that had been expressed by the regulator. But I would say that regardless of that proximate reason, we had been expecting the channel separation to come at some point, and it did.
Speaker #5: But I would say that, regardless of that proximate reason, we had been expecting the channel separation to come at some point, and it did.
Speaker #2: Thank you, David. Sticking with Tej's question, it's—Adrian, it's a high-level question around South Africa and the macro environment. Again, the question from Tej is: How would you evaluate the risk of economic slowdown in SA due to high fuel prices?
David Danilowitz: Thank you, David. Sticking with Tej's question, Adrian, it is a high-level question around South Africa and the macro environment. Again, the question from Tej is: How would you evaluate the risk of economic slowdown in SA due to high fuel prices? How likely is this to affect Insure members or lives growth that we saw in the year?
Speaker #2: How likely is this to affect insured members, or the lives growth that we saw in the year?
Speaker #1: I mean, David, that's a good question. I'm not sure I can guess what it will be. I mean, first, I think our view is that there are green shoots in the economy and business, and I was working hard to turn that into growth.
Adrian Gore: I mean, David, that is a good question. I am not sure I can guess what that will be. First, I think our view is that there are green shoots in the economy and business, and others are working hard to turn that into growth. So I think our default assumption is hopefully we are flat or grow somewhat. That is critical. Points of inflation, like you mentioned, fuel prices, et cetera, obviously create some risk. But the truth is, if you look at the group over time, we have always been in a waxing and waning environment, often more difficult. We tend to grow because we are competitive and others do not. So I am not overly concerned. I do not think that the economy within bands presents a risk to us. I think we will have the ability to manage through it. So a great question. Thanks, Paul. But not a great concern.
Speaker #1: So I think our default assumption is, hopefully, we are flat or grow somewhat. That's critical. Points of inflation, like you mentioned—fuel prices, et cetera—obviously create some risk.
Speaker #1: But the truth is, if you look at the group over time, we have always been in a waxing and waning environment, often more difficult.
Speaker #1: We tend to grow because of competitiveness where others don't, so I'm not overly concerned. I don't think that the economy within bands presents a risk to us.
Speaker #1: I think we'll have the ability to manage through it. That's a great question—thanks for it. It's not a great concern. I think we should expect to continue to grow.
Adrian Gore: I think we should expect to continue to grow. In the areas where we highlighted here, Insure and other areas where we had very strong pricing discipline, we need to keep that, but grow off the back of that. Not concerned within reason. I think our group tends to do ironically better in difficult times. Let's hope that plays out. But a great question. Thank you for it.
Speaker #1: And in areas where, as we highlighted here, Insure and other areas where we had very strong pricing discipline, we need to keep that and grow off the back of that.
Speaker #1: So, not concerned within reason. And I think our group tends to do, ironically, better in difficult times. So, let's see how this plays out, but great question.
Speaker #1: Thank you for it.
Speaker #2: Great, thank you. Adrian, I'm going to switch over to a question from Daniel, Master of Area from Ashburton. The question is for Neville. How should we think about the incremental investment into Vitality Global Markets on the path to the targeted $80 to $100 million in profit?
David Danilowitz: Great. Thank you. Adrian, I am going to switch over to a question from Daniel Sobreira from Ashburton Investments. The question is for Neville. How should we think about the incremental investment into Vitality Global Markets on the path to the targeted USD 80 million to USD 100 million in profit? Neville, I think you have largely dealt with it in the prior question. I do not know if you have anything more to add, but just opening up to you.
Speaker #2: Neville, I think you've largely dealt with it in the prior question. I don't know if you've got anything more to add, but just opening it up to you.
Speaker #3: No, no, I don't think there is more to add. Just to reiterate that the cost base is relatively fixed from a technology perspective.
Neville Koopowitz: No, I do not think there is more to add. Just to reiterate that the cost base is relatively fixed from a technology perspective. We will continue to invest in Vitality AI from a product perspective. We are very confident of landing partners at strong margins.
Speaker #3: We've all continued to invest in Vitality AR from a product perspective, and we are very confident of landing partners at strong margins.
Speaker #2: Great, thanks. I think we have Adam Murphy online on Vitality Life. I'm going to ask the question that came from Tej as well. If you could help us understand the line adjustment to shareholder funds in the EV buildup for the entity: Vitality Life has a 12.12 billion rand adjustment, which makes them better value, less than the VIF.
David Danilowitz: Great, thanks. I think we have Adam Murphy on line on VitalityLife. I am going to ask the question that came from Tej as well. If you could help us understand the line adjustment to shareholder funds in the EV buildup per entity. VitalityLife has a ZAR 12 billion adjustment, which makes them better value, less than the VIF. Thank you. In fact, if we do not have Adam online, Andy, we could shift over to you as well. Yeah, it looks like Adam is available.
Speaker #2: Thank you. In fact, if we don't have Adam online, Andy, we could shift over to you as well. Just—yeah, it looks like Adam is available.
Speaker #4: Hi David. Yeah, thanks for the question. So this is an adjustment for this subordinated debt that sits in the UK business that's been funded from Discovery centrally.
Adam Murphy: Hi, David. Yeah, thanks for the question. This is an adjustment for the subordinated debt that sits in the UK business that is being funded from Discovery, essentially. It is just an adjustment to bring the solo calculation consistent.
Speaker #4: So it's just an adjustment to bring the solo calculation consistent.
Speaker #2: Great. I'm going to Scot for two or three more questions coming through. The next question is to Andy. It's on the dividend cover from Anand, also from White Oak.
David Danilowitz: Great. I am going to Scott. Two or three more questions coming through. The next question is to Andy. It is on the dividend cover from Anand, also from White Oak. Is there a possibility for dividend coverage to improve from 4.5 times further to, say, 4 or 3.5 times over the next couple of years?
Speaker #2: Is there a possibility for dividend coverage to improve from four and a half times further to, say, four or three and a half times over the next couple of years?
Speaker #5: Great, thank you. Thanks for the question. I mean, it's certainly part of our range of options, and I think we wouldn't rule that out.
[Company Representative] (Discovery): Great. Thank you. Thanks for the question. It is certainly part of our range of options, and I think we would not rule that out. We did say when we reinstituted the dividend that we would come in at 5 times cover and look to reduce that over time. You have seen that strategy unfold in these results. Certainly, we need to balance the different priorities around growth and around management of debt, but the dividend is also one of those pieces of our artillery. Obviously, the more that we increase dividends, obviously a great return to shareholders, but it also helps to improve the ROE. Certainly part of the mix. I will not commit to anything at this stage, but it is something that we will consider with the other moving parts.
Speaker #5: We did say, when we reinstituted the dividend, that we'd come in at five times cover and look to reduce that over time. You've seen that strategy unfold in these results.
Speaker #5: And certainly, you know, given that we need to balance the different priorities around growth and around management of debt, but the dividend is also one of those pieces of our artillery.
Speaker #5: And, obviously, you know, the more that we increase dividends, obviously, great return to shareholders, but it also helps to improve the ROE. So, certainly part of the mix.
Speaker #5: I won't commit to anything at this stage, but it's something that we will consider with the other moving parts.
Speaker #2: Neville, the next question I'm going to pass back to you. It regards Europe and the Generali partnership. The question comes from Tej again. The question is: with the Generali partnership ending in 2025, are you on the lookout for other partnerships in continental Europe?
David Danilowitz: Neville, the next question I am going to pass back to you. It regards Europe and the Generali partnership. The question comes from Tej again. The question is: With the Generali partnership ending in 2025, are you on the lookout for other partnerships in continental Europe?
Speaker #3: Great. David, you broke up there, but, you know, just to reiterate, to repeat the question, that since the, termination of Generali, are there opportunities in continental Europe?
Neville Koopowitz: Sorry, David, you broke up there, but just to reiterate, to repeat the question that since the termination of Generali, are there opportunities in continental Europe? Absolutely. We are flat out talking to significant life and health insurers across Europe with regards to the shared value insurance model and embedding that into their businesses. It is too early to speculate on how many of these will be closed, but there is significant activity, as Adrian had shown in his slide. We are confident that whilst the sales cycle is complicated and long, we will align with the correct partners in Europe that will give us a sustainable long-term presence and partnership with them.
Speaker #3: Absolutely. We are flat out talking to significant life and health insurers across Europe with regards to the shared value insurance model, and embedding that into their businesses.
Speaker #3: It's too early to speculate on how many of these will be, will be closed. But there is significant activity as Adrian had, had shown in his slide, and we are confident that whilst the sales cycle is complicated and long, we will align with the correct partners in Europe that will give us a sustainable long-term presence and partnership with them.
Speaker #2: Thank you, Neville. The final—or penultimate—question comes from François for Rian. It’s around SA Life revenue... Sorry, it’s around the SA Life business.
David Danilowitz: Thank you, Neville. The final or penultimate question comes from Francois for Riaan. It is around SA Life revenue. Sorry, it is on the SA Life business. The question is: SA Life revenue increased by 2% and the revenue growth is slowing down with the H2 flat on the H1. Can you comment on whether the slowdown is reflected in premiums in individual life and how the revenue growth outlook will reflect the earnings growth will reflect in the earnings growth for the SA Life segment.
Speaker #2: The question is, SA Life revenue increased by 2%, and the revenue growth is slowing down, with the second half flat on the first half.
Speaker #2: Can you comment on whether the slowdown is reflected in premiums in individual life and how the revenue growth outlook will reflect the earnings growth will reflect in the earnings growth for the SA Life segment?
Speaker #5: Thanks, François. That's a great it's a great question. It really reflects one of the nuances in IFRS 17 reporting in that revenue in IFRS 17, the definition doesn't follow necessarily premium and premium growth.
Riaan van Reenen: Thanks, Francois. It is a great question. It really reflects one of the nuances in IFRS 17 reporting, in that revenue in IFRS 17, the definition does not follow necessarily premium on premium growth. If you consider the numbers in this period, even though revenue growth under IFRS 17 was up 2%, premium growth in individual life was actually up more than 6%. There is a bit of a disconnect between revenue and premium, where revenue reflects your level of services that you expect to deliver in the period rather than premium. Premium growth is rather the one that ultimately drives earnings growth and future growth.
Speaker #5: So, if you consider the numbers in this period, even though revenue growth under IFRS 17 was up 2%, premium growth in individual life was actually up more than 6%.
Speaker #5: So, there is a bit of a disconnect between revenue and premium, where revenue reflects your level of services that you expect to deliver in the period, rather than premium.
Speaker #5: So premium growth is rather the one to the one that ultimately drives, drives earnings growth and, and future growth.
Speaker #2: Thanks, Rian. Another question from Anand—this is for David. Does Vitality have a presence in other markets, such as South Korea and India?
David Danilowitz: Thanks, Riaan. Another question from Anand. This is for David. Does Vitality have a presence in other markets such as South Korea and India? If yes, please share potential of these.
Speaker #2: If yes, please share the potential of these.
Speaker #5: Anand, thanks for the question. So the answer is yes, and yes. So in India, we have a partnership, through our broader AIA partnership, with Tata AIA.
David Ferreira: Anand, thanks for the question. The answer is yes and yes. In India, we have a partnership through our broader AIA partnership with Tata AIA, and we provide the Vitality product to them, help to integrate it into their life products, and so on. In fact, we are right in the process now of a major relaunch of that program. In South Korea, we used to have a partnership there, as you may know, with AIA Korea, and we mutually agreed to terminate that partnership for good reasons on both sides. It was a completely amicable termination. Because of that, we now have the opportunity to look for new partners in life and health insurance in Korea, and we have launched that process. Thank you.
Speaker #5: And we provide the Vitality product to them, help that integrate help to integrate it into their life products. and so on. And in fact, we're right in the process, in now, of a major relaunch, of that program.
Speaker #5: In South Korea, we used to have a partnership there, as you may know, with AIA—with AIA Korea. And we mutually agreed to terminate that partnership, for good reasons on both sides.
Speaker #5: It was a completely amicable termination, and because of that, we now have the opportunity to look for new partners in life and health insurance in Korea, and we have launched that process.
Speaker #5: Thank you.
Speaker #2: Great, thank you, David. We had a final question, so I will ask it. Thank you very much for your interest today. The question is a follow-up.
David Danilowitz: Great. Thank you, David. We had a final question. I will ask it. Thank you very much for the interest today. The question is a follow-up. Just lost it for a second. It will come back shortly. The question is, again, this is from Tej. If the yen depreciation has affected Vitality Global net quote numbers significantly, what can we infer about the concentration of revenues within the segment in Japan? The question is for Deon. Thank you very much.
Speaker #2: Just lost it for a second. It will come back shortly. The question is, again, this is from Tej. If the yen depreciation has affected Vitality Global network numbers significantly, what can we infer about the concentration of revenues within the segment in Japan?
Speaker #2: The question is for Deon. Thank you very much.
Speaker #4: Thanks, David. Thanks for the question. Maybe just to clarify, clearly the Sumitomo contract is a very sizable one—a very successful contract. The impact of the yen is not only around the current year's revenue, and the nature of the contract results in the recognition of a contract asset, which is then also exposed to yen currency movements.
Deon Viljoen: Thanks, David. Thank you for the question. Maybe just to clarify, clearly the Sumitomo contract is a very sizable one, a very successful contract. The impact of the yen is not only around the current year's revenue, and the nature of the contract results in the recognition of a contract asset, which is then also exposed to the yen currency movement. That is why it is so pronounced in the overall result. It is recognized as part of the income overall. So yes, it is a sizable contract. We obviously have a number of partners across the globe, but the impact is really a result of the combination of the contract asset being recognized and fair valued at spot rate at the end of each reporting period.
Speaker #4: And that's why it is so pronounced in the overall result. It is recognized as part of the income overall. So yes, it is a sizable contract.
Speaker #4: We obviously have a number of partners across the globe, but the impact is really a result of the combination of the contract asset being recognized and fair valued at the spot rate at the end of each reporting period.
Speaker #2: Great. Deon, thank you very much for that. Adrian, we are clear of all the questions. Again, just thanks for all the questions coming through.
David Danilowitz: Great. Deon, thank you very much for that. Adrian, we are clear of all the questions. Again, just thanks for all the questions coming through. Please post them to us directly through myself or through the broader team. Adrian, back to you.
Speaker #2: Please post them to us directly—either through myself or through the broader team. Adrian, back to you.
Speaker #1: David, thank you. Thanks for that. And thanks to all of you for the interest and the time. We are very grateful for that. We appreciate the probing questions and the interest in the group.
Adrian Gore: David, thank you. Thanks for that, and thanks to all of you for the interest and the time. We are very grateful for that. We appreciate the probing questions and the interest in the group. It has been a very important year for us. Again, thank you for the time. We are done, David. Thanks to all the team and to our greater Discovery group. Thank you.
Speaker #1: It's been a very important year for us. Again, thank you for the time. We are done, David. Thanks to all the team and to our, our, our great Discovery group.
