Press release - 19 April 2013 09:26

Solid performance from South Africa’s benchmark open medical scheme

The Scheme again experienced substantial membership growth, increasing principal membership by 6% off an already high base. The Scheme now covers 51% of the open medical scheme industry, enhancing its position as the benchmark open medical scheme in South Africa
Discovery Health Medical Scheme achieved a strong financial performance recording a net surplus (including investment income) of R789 million. Members’ funds in reserve increased by 11% to R8.2 billion.

19 April 2013 – The Discovery Health Medical Scheme today made public its financial results for the year ended 31 December 2012. The Scheme delivered a solid performance against key metrics, which is evidence of the Scheme’s ability to deliver financial stability, predictability and continuity to members during 2012.

Milton Streak, Principal Officer of the Discovery Health Medical Scheme, said; “The medical schemes environment in South Africa faces significant challenges. Healthcare costs continue to rise above consumer price inflation; presenting a difficult balance for medical schemes to maintain between providing quality and access and on the other hand, containing costs.” Cost pressures in healthcare are a global phenomenon and not unique to South Africa. It arises from many factors, including an ageing population, the increasing burden of chronic disease and the cost impact from new medicines and technologies.

Streak puts the Scheme’s performance in context; “When one looks at the complex healthcare environment, the Discovery Health Medical Scheme continued to deliver on its long-term core objectives. Our responsibility is to ensure all members of the Scheme have access to high-quality; cost-effective healthcare cover while also ensuring the Scheme remains sustainable and viable for its members. This, however, cannot happen in isolation. We also need to contribute to a better healthcare system for the Scheme’s members and all other stakeholders.”

The Discovery Health Medical Scheme is the country’s largest open medical scheme, providing cover to more than 2.4 million South Africans. The Scheme is managed by Discovery Health (Pty) Ltd, who works with the Scheme to deliver quality and value on specific metrics that are key for any medical scheme’s performance. Dr Jonathan Broomberg, Chief Executive Officer of Discovery Health, said; “As the administrator of the Discovery Health Medical Scheme, we measure effective scheme performance and management according to a strict set of metrics. These include membership growth, financial strength, optimal benefit design, sound risk management, high levels of customer service, wellness and health interventions and adhering to the highest standards of governance. Working continuously with the Discovery Health Medical Scheme and its Board of Trustees around these critical issues, has resulted in a strong performance for the Scheme during the past year.”

The Discovery Health Medical Scheme delivered strong performance across these metrics, with continued growth in membership, over R8.2 billion of members’ funds in reserve and low lapse rates. Global Credit Ratings have once again validated the Scheme’s position in terms of its claims paying ability with an AA+ credit rating – the highest rating a medical scheme can achieve. The Scheme has achieved this rating for the past 12 years and is the only open scheme that has achieved this rating.

Streak concluded; “We will continue to focus on best practice governance, sound risk management and innovation in product design to maintain and enhance the Discovery Health Medical Scheme’s leadership position in South Africa. In this way, we aim to ensure excellent value for members.”

Notes to the editor

Key performance highlights for 2012 for the Discovery Health Medical Scheme

The Scheme again experienced substantial membership growth, increasing principal membership by 6% off an already high base. The Scheme now covers 51% of the open medical scheme industry, enhancing its position as the benchmark open medical scheme in South Africa
Discovery Health Medical Scheme achieved a positive operating result with gross contribution income of R35.19 billion and a net surplus (including investment income) of R789 million. Members’ funds in reserve increased by 11% to R8.2 billion.
The Scheme continued to deliver on its objective of reducing non-healthcare expenditure. For this reason, administration fees have been the only cost component that has decreased in real terms. All other areas of relevant healthcare expenditure continue to increase above CPI. During 2012, fees paid by the Scheme to the Administrator increased by 2.6%, compared to the average CPI for 2012 of 5.6%. This represents a real reduction of 3.0% due to ongoing reductions in administration fees which have been negotiated with Discovery Health (Pty) Ltd.
The substantial membership growth during 2012 has placed additional pressure on the Scheme to meet its statutory reserve level – for every new member who joins, the Scheme has to hold 25% of that member’s annual gross contributions in reserve. The Scheme has, however, achieved a solvency leveI of 23.41% which is slightly lower than the statutory requirement, but in line with the solvency trajectory agreed with the Council for Medical Schemes. The Scheme is expected to reach the 25% solvency level in 2015. To illustrate the financial strength and stability of the Scheme, member reserves totaled R8.2 billion for the period under review.
During 2012, the Discovery Health Medical Scheme continued its commitment to providing its members with rich benefits and the widest plan choices, at the most competitive contributions. The Scheme is also expanding access to more affordable healthcare cover to the lower income market - the KeyCare plans now comprise over 400,000 lives.
The competitiveness of the Scheme’s benefits and contributions is demonstrated in both its ongoing strong membership growth, and in the low lapse rate, which reduced from an already low 4.3% in 2011 to 4.1% in 2012.
The Discovery Health Medical Scheme and its administrator, Discovery Health (Pty) Ltd, have introduced a range of technological and service innovations aimed at ensuring quality of care for members, greater control of costs and the improvement of members’ experience in the healthcare system. This includes smartphone applications for members, and the HealthID application for health professionals.

Details about the Discovery Health Medical Scheme Annual General Meeting

The Scheme’s annual general meeting will take place on Thursday, 20 June 2013. Notifications will be sent to all members at least 21 days in advance as stipulated by the Scheme Rules.
At the 2013 Annual General Meeting, members also need to elect four Trustees to serve on the Board of Trustees of the Discovery Health Medical Scheme.
Members have access to full details of the trustee nomination process which is published on www.discovery.co.za to familiarise themselves with the duties and responsibilities of being a Scheme Trustee and how to submit nominations to the Scheme’s nomination committee.

Ends

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Discovery information

Discovery is an authorised financial services provider.

Discovery operates in the healthcare cover market in South Africa, the United Kingdom and China; the life assurance market in South Africa and the United Kingdom; as well as the long-term savings and investment market, and short-term insurance market in South Africa.

Vitality, Discovery’s wellness programme, is the world’s largest scientific, incentive-based wellness solution. It provides individual and corporate wellness initiatives in South Africa, the United Kingdom, the United States of America and China. The global Vitality membership base now exceeds 3.4 million lives.

Discovery’s core purpose is to make people healthier, and to enhance and protect their lives through financial products that clients need and want.

South African operations

Discovery Health

Launched in 1992, Discovery Health isSouth Africa’s largest healthcare funder and manager of medical schemes. It manages 14 medical schemes.
This includes the Discovery Health Medical Scheme, which has a 50% share in the open medical schemes market, making it South Africa’s largest open medical scheme.
Discovery Health covers more than 2.6 million lives.
The Scheme is the only one in South Africa to enjoy an AA+ rating for its claims paying ability, the highest possible credit rating from international rating agency Global Credit Ratings.
The Discovery Health Medical Scheme holds over R7.4 billion in reserves.
Discovery Health pioneered consumer-driven healthcare in South Africa with the introduction of innovations like the Medical Savings Account and its wellness programme, Vitality.
Discovery Health is continuously innovating new products and tools to enhance the quality of care members receive, including HealthID, an iPad-based application for doctors launched in 2012.
Discovery Health was voted the top medical aid brand in the Sunday Times Top Brands survey for both 2010 and 2011.
Discovery Health was voted the top healthcare product supplier at the 2010, 2011 and 2012 Financial Intermediaries Association of Southern Africa (FIA) Awards.
In 2012, the PricewaterhouseCoopers fifth biennial Strategic and Emerging Issues in South African Insurance survey rated Discovery Health’s insurance products as the leader in the industry.

Discovery Life

Discovery Life was launched in 2000 and is South Africa’s fastest growing major life assurer in the risk market, having captured 25% of the overall risk broker market.
It was the first South African insurer to separate risk from investment, leading significant change in the industry.
With 364 887 individual policies, the embedded value of its business is now more than R17 billion including Discovery Invest.
Discovery Life addresses the problem of underinsurance through its unique integrated operating model and through innovative product development.
Discovery Life was voted the top life assurer in the Sunday Times Top Brands survey for both 2010 and 2011.
Discovery Life was voted the top risk and life assurance supplier at the 2010 Financial Intermediaries’ Association of Southern Africa (FIA) Awards and the top long-term insurer: recurring savings at the 2011 and 2012 FIA Awards.
In 2012, the PricewaterhouseCoopers fifth biennial Strategic and Emerging Issues in South African Insurance survey rated Discovery Life’s life products as the leader in the industry.

Discovery Invest

Discovery Invest was launched in October 2007 and declared its maiden profit in 2010.
Discovery Invest combines the breadth and skill of the asset management industry with the existing research and development capabilities of Discovery Life.
The company offers consumers a unique and comprehensive product range that addresses the current gaps in the market by offering greater protection against poor investment choices.
With 74 327policies, Discovery Invest now has more than R26.6 billion in assets under management.
Through Discovery Invest’s LISP platform, clients have access to over 329 local and 65 offshore investment funds.
Discovery Invest is now the largest writer of endowment policies in South Africa with a 21% market share.
In 2011, Discovery Invest received the Financial Intermediaries Association of Southern Africa (FIA) award for best recurring premium business.

Discovery Insure

Discovery Insure was launched in May 2011 and now has 27 973 policyholders.
This pioneering product was created by leveraging the behavioural expertise developed in the Vitality programme with the latest telematics technology.
The unique Vitalitydrive programme encourages and rewards better driving behaviour and ensuring that vehicles are roadworthy.
At the heart of Vitalitydrive is the DQ-Track telematics device that measures and reports crucial aspects of driving behaviour.
Vitalitydrive provides up to 50% fuel rewards on clients’ monthly BP fuel spend.
Young adults between 18 and 25 can receive further discounts of up to 25% on their motor premiums.
Discovery Insure offers comprehensive vehicle, personal and household cover.

Discovery Vitality

Launched in 1997, Vitality is Discovery’s science-based wellness programme that underpins each of the Discovery businesses and is an international brand in its own right.
It is the largest programme of its kind in the world.
Vitality encourages healthy behaviours that reduce long-term healthcare costs by rewarding members for improving their health.
There are now more than 1.6 million Vitality members in South Africa.
Vitality is accredited by the Sports Science Institute of South Africa.
The Vitality value offering is enhanced by the DiscoveryCard, Discovery’s unique Visa credit card which gives members real cash back.
Launched in 2004, the DiscoveryCard is the largest non-bank card in issue, with an 8.9% share of point-of-sales spend. There are now 231 302 primary cardholders.
The HealthyLiving™ benefit offers Vitality members up to 25% cash back on HealthyCare™ products at Clicks, HealthyGear™ at adidas and TotalSports stores, and HealthyFood™ items at Pick n Pay.
Vitality now has the ability to integrate into over 100 fitness tracking technologies.

International operations

United Kingdom

In the UK, Discovery has a 75% shareholding in a joint venture with Prudential plc. Through PruHealth and PruProtect, the company offers healthcare cover and protection products.

PruHealth

Launched in 2004, PruHealth is the fourth largest private medical insurer in the UK and the only one that rewards people for leading a healthy lifestyle.
PruHealth now covers 548 970 lives.
It offers consumer-directed products linked to the Vitality wellness programme.
In 2010, Discovery acquired Standard Life Healthcare, thereby leveraging the significant assets of both companies and resulting in greater scale for PruHealth.
PruHealth has won several awards for its product innovations.

PruProtect

PruProtect, which was launched in 2007, markets consumer-engaged life assurance products in the UK market.
The company’s products integrate with those of PruHealth and Vitality to unlock added value and significant premium savings for clients.
The company has become a major player in the UK protection market. With 136 164 policies in force, it now covers 163 566 lives.
PruProtect has received industry recognition, including awards in four categories at the 2011 Defacto Awards. The company was also named Best Individual Protection Provider in 2011 by Professional Adviser, and walked off with the Innovation Award at the 2011 Protection Review.

United States

The Vitality Group

The Vitality Group was launched in 2007 and offers a stand-alone version of the Vitality programme to self-insured, large employer groups and to healthcare carriers.
Discovery holds a 75% share in The Vitality Group, 25% being held by Humana Inc.
The Vitality Group now covers 293 674 lives.
The Vitality Group has entered into a partnership with Wellness and Prevention, a subsidiary of Johnson&Johnson, the world’s premier consumer health company.
The Vitality Group recently announced a partnership with ADP, one of the world’s largest providers of payroll and employee benefits administration solutions.
In 2011, the group was awarded the C Everett Koop National Health Award for its work with Alcon Laboratories, a highly prestigious award recognising outstanding workplace health improvement programmes.

HumanaVitality

Launched in 2011, HumanaVitality is a joint venture between Humana Inc and Discovery (through The Vitality Group) that makes Vitality available to Humana clients with commercial medical plans.
Discovery holds a 25% share in HumanaVitality.
Humana is the third largest US insurer, based on revenue. Humana has approximately 11.8 million medical members and 7.7 million specialty members.
HumanaVitality now has more than 1.5 million Vitality members.

China

Ping An Health

Ping An Health was launched in China in 2010, after Discovery acquired a 20% share in Ping An Health Insurance Co of China Ltd, a wholly-owned subsidiary of Ping An Insurance (Group) Company of China.
Ping An Insurance is China’s leading insurer and the second largest in the world.
The joint venture will see Discovery’s product innovation and consumer-engaged model exported to a potential market of 83 million families.
Vitality was launched in China through Ping An Health in May 2012.