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Shares in South Africa’s Discovery fell more than 3% on Wednesday after the insurer said it had spent R2.2 billion on new initiatives despite a 94% drop in earnings for the full year.
The company, whose model links premium rates to customers’ lifestyle choices, had already warned that its full-year earnings could disappear entirely with a coronavirus-related provision of R3.3 billion and impact. even bigger from changes in interest rates in key markets.
However, it said on Wednesday that its operating performance had been resilient and that it had spent R2.2 billion developing new lines of business, namely a bank it launched in November 2019.
These new initiatives have consistently dragged earnings in recent years, and shareholders are nervous about how much is being invested in the particular bank.
Discovery said the bank, which adapts its insurance model to loans and savings by linking interest rates to customer behavior, now had 489,000 accounts, R3.7 billion worth of deposits and loans of the same value.
The insurer’s earnings per share, the main earnings measure in South Africa, for the year through June 30 fell to 45 cents ($ 0.0274) from 789 cents a year earlier. The 94% decline was in the middle of their forecast range for the decline.
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