JOHANNESBURG (Reuters) – South African insurer Discovery Ltd held off on restoring its dividend on Thursday, even as it reported a 26% jump in normalised half-year profits and said big bets on growth initiatives were showing signs of paying off.
Discovery has not paid a dividend since before the pandemic, and held back even as other financial firms reinstated payouts. Apart from COVID-19 uncertainties, in the past it has cited a preference to funnelling capital back into new ventures such as its recently launched bank.
“Due to the continued uncertainty caused by COVID-19 on the demographic and economic environment in SA (South Africa), the Discovery board has… decided not to declare an interim ordinary dividend,” it said in a statement, adding, payouts would continue to be reviewed on an ongoing basis.
The Johannesburg-based insurer said high mortality claims from COVID-19 continued in the six months ended Dec. 31, partly due to the outbreak of the coronavirus Omicron variant.
It paid out 3.4 billion rand ($222.82 million) in COVID-19 claims, gross of reinsurance, but added the impact on earnings was limited by reinsurance arrangements and its provisions. It said it believed provisions to be sufficient to withstand any potential fifth wave of infections.
Discovery still hit the upper end of its previously forecast range for headline earnings per share (HEPS) – the main profit measure in South Africa – for the period at 499.1 cents, a 78% jump, helped by South Africa’s record low interest rates and depreciation in its currency rand.
On a normalised basis, HEPS rose 26%.
Discovery ploughed 9% of its operating profit into its bank, while 8% went towards other new initiatives. Discovery Bank’s half-year operating loss narrowed to 498 million rand, compared to 611 million rand a year earlier, which the insurer said had exceeded expectations.
($1 = 15.2592 rand)
(Reporting by Emma Rumney; Editing by Clarence Fernandez and Rashmi Aich)
