Vitality’s health and life businesses have helped to drive a 22% increase in new business for parent company Discovery in the UK on the previous year, according to audited results for the year to 30 June 2022.
The results reveal VitalityHealth and VitalityLife saw new business increase by 30% and 13% respectively year-on-year. This contributed to a 22% increase in new business for the group in the UK.
Claims cost less than expected
VitalityHealth new business hit £86m over the period as the group benefitted from its direct to business strategy, while earned premiums rose 9% to £560 million driven by strong retention levels, and total lives grew by 15% to 839,000.
When removing business acquisition costs and investment in developing the business, VitalityHealth generated £32 million cash.
The division delivered normalised operating profit of £66 million, up 43% year-on-year. While claims rose over the period, they remained below pre-pandemic levels and their severity and cost were less than the business anticipated. This figure also benefited from the acceleration of financial reinsurance repayments in the previous period.
While VitalityLife did not bring in as big an increase in new business as VitalityHealth over the year, it still saw new business grow to £62 million, with the division improving its position to fifth place in terms of market share for new business in Q1 2022. The division reported an increase of normalised operating profit of 7% to £33.1 million.
The two divisions contributed to an increase of normalised operating profit of 28% to £98.7 million in the UK, with new business up to £148 million excluding new initiatives. Earned premiums increased by 8% to £893 million while total lives covered were also up by 12% to 1.56 million. The past year also saw the group exit the UK investment market through VitalityInvest, despite progress made over the past year which the group attributed primarily to “significant” margin compression in the industry.
Weaker Vitality-integrated sales in some Asian markets
While Vitality Group profits increased by 15% to US$31 million, earnings growth was affected over the year. The group revealed that in 2021 it benefited from a forex hedge gain, which was not repeated this year. Although this was offset over the past year by income related to the delivery of an initial component of Vitality intellectual property, related to its Amplify Health transaction. Earnings were also adversely affected by weaker Vitality-integrated sales in some key Asian markets amid Covid lockdowns over the past year.
However, revenue growth has remained resilient, with fee income growing 22% to US$100.4 million and insurance partners’ Vitality-integrated premiums growing by 10% to US$1.4 billion.
The period also saw Vitality grow its footprint to 35 markets by June of this year, with Vitality membership from insurance partners increasing 25% to 3 million. Sumitomo Life Vitality in Japan reached a milestone of 1 million Vitality-linked policies sold since launching in 2018.
Ping An Health Insurance’s (PAH) profit from operations, represented by the group’s share of after-tax operating profit less Discovery’s costs to support the business, fell 18% to R338 million. The business’ pre-tax operating profit, excluding investment income and gains, rose 30%, highlighting the strong operating performance over the period, curtailed by the decline in the China equity market. Total new business premiums fell 15% to R11.5 billion, which were affected by the group’s restructured arrangement with Ping An Life. However, new business premiums on PAH’s own insurance licence increased by 6% to R8.9 billion, following increased development of PAH’s own sales channels.
Across the group, Discovery posted normalised profit from operations of R9,384m up from R6,494m in 2021, the first increase in year-on-year profits since 2018 when the group posted profit of R8,266m.