The Discovery group estimates it will need R3.3 billion over the next two years due to the impact of deaths and hospitalization on its lives insured as a result of Covid-19.
Two-thirds of that amount was set aside directly for the impact on Discovery Life and Discovery Health members who contract Covid-19 and possibly die. The amount includes its operations in South Africa and the United Kingdom.
About R1.1 billion has been earmarked for the economic impact of the pandemic on the group’s operations. It has a significant impact on his new business and his debt burden.
In a trading statement published on the JSE’s news service, Sens, on Monday, the group says it expects the R3.3bn to directly contribute to a reduction in normalized operating profit of between 18% and 28% over the previous year.
In addition to deaths and hospitalization due to Covid-19, the pandemic has also caused many people to postpone voluntary medical procedures and the accumulation of claims after the pandemic is over will also lead to significant costs for the group.
Claims against Discovery’s insurance business dropped significantly during the state of containment.
Discovery Health’s new business is lagging behind as new employment has stagnated – and so few new people are registered on the medical funds it administers.
The group now expects headline earnings per share in the 12 months to end-June to be around 70% to 90%. Headline earnings per share are expected to be between R2.36 and R0.78, compared to R7.89 in 2019.
This is due to the impact of Covid-19 as well as the higher interest rates the group has to pay after the country’s downgrade to junk status.