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UPDATE 1-S.Africa's Discovery scraps dividend, flags possible capital raise

UPDATE 1-S.Africa's Discovery scraps dividend, flags possible capital raise

reuters.com · 09/02/2021 02:40
UPDATE 1-S.Africa's Discovery scraps dividend, flags possible capital raise

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- South African insurer Discovery DSYJ.J scrapped its annual dividend and said it may have to raise equity capital over its investment in Chinese insurer Ping An 601318.SS, taking the shine off its previously announced surge in profits.

The company, which ties premium rates to its clients' lifestyles, has not paid a dividend since the COVID-19 pandemic took hold last year and said continued uncertainty around the impact of the virus meant it would continue to hold off for now.

The pandemic has hit the firm's core life business hard, with Discovery saying the impact was worse than expected in South Africa and more severe than in its other market, Britain.

Newer business lines drove growth but Discovery said that its partnership with Ping An, which delivered a 126% rise in normalised operating profit, required 1.5 billion rand ($104 million) more capital from Discovery to meet regulatory requirements.

"Discovery has previously responded to fund such growth opportunities through equity rather than debt," it said, adding it was still weighing options but any equity raised would be ring-fenced for this purpose.

"The reintroduction of ordinary dividends will be considered on an ongoing basis," it said.

Discovery had already flagged a more than ten-fold rise in headline earnings per share (HEPS) - the main profit measure in South Africa. HEPS stood at 454.7 cents, compared to 45 cents a year earlier and in the middle of its forecast range.

The main driver of the rise was the impact of changes in its economic assumptions. On a normalised basis its HEPS fell by 9% to 518.7 cents, compared to 570.7 cents last year.


(Reporting by Emma Rumney; Editing by Wendell Roelf and Edmund Blair)

((Emma.Rumney@thomsonreuters.com; +27115952832;))