Discovery Limited · JSE:DSY
Discovery — UBS SA Financials Conference 2023
48 slides from Discovery's conference presentation, 2023
Slide 1: UBS SA Financials Conference 2023
UBS SA Financials Conference 2023
Slide 2: Discovery Geographical Footprint
DISCOVERY GEOGRAPHICAL FOOTPRINT Vitality markets Lives impacted Employees
Slide 3: Discovery Group Financial Metrics
DISCOVERY GROUP FINANCIAL METRICS Discovery Health Discovery Insure Discovery Invest Discovery Bank Discovery Life Vitality Health Vitality Life USA Strong operational profit growth, reflecting robust performance of mature businesses and traction in +24% +12% +44% start-ups R’m Operating profit New
Slide 4: SA Composite
SA COMPOSITE ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa AMBITION 2026 35% 18 70% 50 000 2500 16 45 000 30% R’m, rebased to 100 as at 31 Dec 2007 (inception) 60% 40 000 14 2000 25% 35 000 50% 12 30 000 Discovery SA will be t
Slide 5: Discovery SA Growth and Resilience Despite Slowing Economic Growth
DISCOVERY SA GROWTH AND RESILIENCE DESPITE SLOWING ECONOMIC GROWTH Global growth Central bankers remaining cautious Volatile Actuarial dynamics under pressure despite inflation cooling globally exchange rates remain robust Real GDP growth1 CPI inflation rates2 Central bank policy rates3 USD/ZAR and
Slide 6: Strong Operating Performance Sustained Across Discovery SA
STRONG OPERATING PERFORMANCE SUSTAINED ACROSS DISCOVERY SA New Business (R’m) Non-insurance Income (R’m) Operating Profit (R’m) Group Embedded Value (R’m) 3 000 10 000 18 000 100 000 9 000 +35% +8% +8% 16 000 +7% 2 500 90 000 CAGR CAGR 8 000 CAGR CAGR 14 000 80 000 7 000 2 000 70 000 12 000 6 000 60
Slide 7: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 8: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 9: Strong Operating Performance Across the SA Composite
STRONG OPERATING PERFORMANCE ACROSS THE SA COMPOSITE Discovery Health Discovery Life Discovery Invest Discovery Insure Discovery Bank to R3 854m to R4 807m to R1 560m to R62m Group life returned to 2019 2020 2021 2022 2023 Once-offs profitability Individual life: +8% Profit excl. once-offs +14% excl
Slide 10: Group Well Capitalised with Robust Cash Generation
GROUP WELL CAPITALISED WITH ROBUST CASH GENERATION Highly liquid across the Group Value in Force Strongly capitalised SA Composite Liquid assets across the Group1 Group Net Value in Force (R’m) (R’m) Jun 22 Jun 23 90 000 20 000 Cover Cover 80 000 18 000 16 000 70 000 Life 1.7x 1.9x 14 000 60 000 12
Slide 11: Positive Growth Metrics Across the Composite
POSITIVE GROWTH METRICS ACROSS THE COMPOSITE Discovery Health Discovery Life Discovery Invest Discovery Insure Discovery Bank Membership Market Share AuM Gross Written Premium Accounts Lives under administration Quarter ending June 2023 Invest Assets under 6 000 Accounts (m) Gross Written Premium (m
Slide 12: Discovery SA Client Attributes
DISCOVERY SA CLIENT ATTRIBUTES Age Distribution Family Size Average income and engagement Discovery Health Average number of lives on a Discovery Health Discovery Bank personal annual Medical Scheme membership income 12% 28% 0-25 26-35 36-45 46-55 56-65 65+ 15% 13% Discovery Life 32% <350k 350k-600k
Slide 13: Client Integration Analysis
CLIENT INTEGRATION ANALYSIS Product Adoption Client integration Superior Shared Value correlations New business from existing Discovery Clients Clients with more than one Discovery product Better health management 50% 25% Blue Bronze Silver Gold Diamond Blue 100% 77% 69% 46% 39% Better financial 45%
Slide 14: Integration Amplifies Shared-Value Rewards
INTEGRATION AMPLIFIES SHARED-VALUE REWARDS ACCESS TO CREDIT AND BOOSTED INVESTMENTS BOOSTED FUEL REWARDS M Up to R5m in secured credit on the back of investments Up to 20% on fuel and Uber D M rides in addition to Vitality Drive Up to 15% monthly contribution boost on recurring D H M Retirement Annu
Slide 15: Integration Opportunity Set Continues to Grow
INTEGRATION OPPORTUNITY SET CONTINUES TO GROW Retail Client integration Corporate Client integration Corporate Client Size Discovery Corporate Clients in the JSE top 40 1 21 2 22 3 23 4 24 5 25 6 26 7 27 8 28 9 29 10 30 11 31 12 32 13 33 14 34 15 35 16 36 17 37 18 38 19 39 Discovery individual Corpo
Slide 16: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 17: Shared-Value Correlations Maintained
SHARED-VALUE CORRELATIONS MAINTAINED Discovery life Discovery Health Discovery Insure Discovery Bank Mortality Claims by status In-hospital Claims by status Loss Ratio by status Credit Loss Ratio by status 120 120 120 120 100 100 100 100 80 80 80 80 60 60 60 60 40 40 40 40 20 20 20 20 - - 0 - Blue B
Slide 18: Active Rewards 3.0 Consolidates All Vitality Behaviours in the Bank App
ACTIVE REWARDS 3.0 CONSOLIDATES ALL VITALITY BEHAVIOURS IN THE BANK APP Fully accessible through Personalised Full view of dashboard, Recognition and Full access to spend the Discovery Bank app gameboard tiles rewards and achievement history Discovery Miles Vitality activities with discounts
Slide 19: The Shared-Value Rewards Currency More Fungible Than Cash
THE SHARED-VALUE REWARDS CURRENCY MORE FUNGIBLE THAN CASH >7.2bn >7.1bn Earned in FY23 Burned in FY23 Monetise Transfer HealthyFood HealthyDining Fuel Travel HealthyBaby Vitality Active Rewards Friend Referrals Prepaid purchases Spending Uber PrimeFlex In-store and online spend Life Bank Integrator
Slide 20: Miles Is the Most Valuable Rewards Currency in South Africa
MILES IS THE MOST VALUABLE REWARDS CURRENCY IN SOUTH AFRICA Best in category How to earn rewards How to spend rewards Personal Baby General card Groceries Fuel Retail Travel Prepaid Cash out Transfer care essentials spend Yes, up to Yes, up to Up to 75% Up to 50% Up to 50% Up to 20% Up to 0.67% Yes
Slide 21: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 22: Enhanced by the Behavioural Platform | The Vitality Dataset and Capability
ENHANCED BY THE BEHAVIOURAL PLATFORM | THE VITALITY DATASET AND CAPABILITY Largest behavioural dataset globally Mortality and morbidity curves Engagement correlations Over 60 million life years of behavioural linked >1m curves per age based on Granular disease specific mortality Disease specific mor
Slide 23: Personalisation Ecosystem
PERSONALISATION ECOSYSTEM ENRICHED DATA INDICES § Product & engagement indices PERSONALISATION SERVICE, OPERATIONS FUTURE § Behavioural & segmentation AND ENGAGEMENT AND SECURITY APPLICATIONS § Profitability indices § Recommender indices Tailored app Contextual Enhance KYC Virtual advice Smart contr
Slide 24: Access to Unique Client Data Sets
ACCESS TO UNIQUE CLIENT DATA SETS Geolocation § Geolocation cluster 1.7 3.0 § Work and after-hour 5k 3k m travel distance m 2.5 Fuel and km transport-related spend Bureau data and online spend
Slide 25: Case Study | Insure Pricing Opportunity
CASE STUDY | INSURE PRICING OPPORTUNITY Predicting distance using Distance is a good Claims score predicts Lapse rate affects spend clusters predictor of claims score loss ratio overall client lifetime value Relative expected new business Relative lapse rates by Distance AvE – Distance Index loss ra
Slide 26: Case Study | Growing Insure Pricing Opportunity
CASE STUDY | GROWING INSURE PRICING OPPORTUNITY Insure client risk matrix Significant growth opportunity Lapse Rating Low Standard High Low 17.6% 11.9% 5.7% Claims Score Standard 9.0% 12.0% 10.2% Rating High 4.8% 10.3% 18.5% ±60% of clients can receive lower premiums upfront
Slide 27: Digital | Focus on Member Journeys
DIGITAL | FOCUS ON MEMBER JOURNEYS Onboarding Policy changes Claims payment Servicing Fraud & security Rewards & tracking Automatic address Instantly add new Instantly settle medical Real-time assistance State-of-the-art vehicle Vitality behaviours verification for Bank vehicles and portable bills w
Slide 28: Service Differentiators and Client Experience
SERVICE DIFFERENTIATORS AND CLIENT EXPERIENCE Live Assist Live Action WhatsApp Servicing Great Client Experience Best service experience and emotion 1 115 110 105 Banking industry 100 95 90 85 Discovery Ban k B Ban k C Ban k D Ban k E Ban k f Ban k G Ban k H Ban k WhatsApp servicing App co-browsing
Slide 29: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 30: Distribution Channel Overview
DISTRIBUTION CHANNEL OVERVIEW Tied intermediated Independent intermediated Discovery Connect Distribution Services Leading market share Leading market share End-to-end D2C capability 100% Risk Retail Affluent market share Risk Retail Affluent market share 50% Individual Health Digital Applications 8
Slide 31: Distribution Asset Size and Strength
DISTRIBUTION ASSET SIZE AND STRENGTH Health Life High contribution to new business Market share % of New Business from Tied Life Risk Sales Market Share Agents and Discovery Connect 90% 80% 70% Others 60% DIS B C D E DHMS Rest of Industry 50% Invest Insure 40% GWP absolute growth for intermediated i
Slide 32: Discovery Agent Productivity
DISCOVERY AGENT PRODUCTIVITY Large agent force with lower turnover Highest performers in the industry Multi-product focus2 Active agents Average productivity per active agent Risk and Investment Risk Only Investment Only 800 (R 000s APE) 600 2020 2021 2022 1 000 29% 29% 400 42% 47% 51% 200 0 A B C D
Slide 33: Discovery Connect | Strong Growth
DISCOVERY CONNECT | STRONG GROWTH Significant brand investment1 Share of new business Growing in-force book Travel experience %Share of new business DCDS Policy Lives 35% 1 000 30% Ongoing digital advertising and campaigns 800 25% 20% 600 15% 400 10% 200 5% 0% 0 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Ja
Slide 34: Discovery SA Attributes and Differentiated Model
DISCOVERY SA ATTRIBUTES AND DIFFERENTIATED MODEL ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa 35% 18 70% 50 000 2500 16 45 000 Market Leading Products R’m, rebased to 100 as at 31 Dec 2007 (inception) 30% 60% 40 000 14 2000 2
Slide 35: Opportunity to Increase Scale and Create Value
OPPORTUNITY TO INCREASE SCALE AND CREATE VALUE Creating larger profit pools by Banking products are widely used Higher profitability integrating insurance and banking Most used financial products in South Africa Retail Financial sector profits4 (June 2023)1 Return on Equity2 (June 2023) Banks Insura
Slide 36: Discovery Bank Competes Well Against Digital Banks and SA Incumbents
DISCOVERY BANK COMPETES WELL AGAINST DIGITAL BANKS AND SA INCUMBENTS Global digital banks at similar stages South African incumbents Deposit per client NIR per customer (ZAR) At 4 years after launch In USD 1,200 1 169 1,100 Discovery Bank’s 1,000 912 deposit per client is A 1 963 512 502 competitive
Slide 37: High-Quality Growth from the Bank
HIGH-QUALITY GROWTH FROM THE BANK Market share of Sales Product mix of sales new credit volumes New Business split New-to-Bank daily sales Product mix of sales Market share of new credit New business by number of (per business day; calendar month) business volumes Discovery products (3-month moving
Slide 38: Growing Engagement Over Time
GROWING ENGAGEMENT OVER TIME Client mix by tenure Payments Spend Debit orders App logins Client mix by duration- Payments volumes and values Total spend (Normalised) Debit order volumes and values Total app logins (sent and received) Indexed to Jul-21 Indexed to Jan-22 Indexed to Jul-21 on-book inde
Slide 39: South African Home Loan Landscape
SOUTH AFRICAN HOME LOAN LANDSCAPE Home loans are South Africans’ largest Approximately 9 out of 10 clients are ~8 out of 10 clients could improve their credit commitment paying interest at prime or higher rates home loan rate South African market balances R1.1tn Balances held by Discovery Bank clien
Slide 40: The Discovery Bank Home Loan
THE DISCOVERY BANK HOME LOAN Discovery Bank Home Loan offering Integrated Discovery Home Ecosystem Implementation calendar Comprehensive building Nov’23 and contents cover Protection in the event of death or defined medical conditions A market-first Shared-Value Home loan Staff Interest Rate that re
Slide 41: Diversifying the Discovery Bank Lending Suite
DIVERSIFYING THE DISCOVERY BANK LENDING SUITE UNSECURED SECURED TERM AVERAGE TRANSACTION VALUE Revolving Access Facility limit > R20,000 ~R1,000,000
Slide 42: The Revolving Access Facility
THE REVOLVING ACCESS FACILITY Only pay fees when the facility is used Pay up to 7% less interest Flexible monthly repayments 2.5% to 100% of outstanding balance Apply in less than 5 minutes Available from the end of Q4’23
Slide 43: Greater Efficiency and Value Created as the Bank Scales
GREATER EFFICIENCY AND VALUE CREATED AS THE BANK SCALES Operating expense efficiencies Operating leverage Stable acquisition costs Additional value created Fixed and variable costs over time Expenses and income per customer Acquisition cost1 per client and daily new Profit before new business acquis
Slide 44: The Operating System for the SA Composite
THE OPERATING SYSTEM FOR THE SA COMPOSITE Access all Discovery products from the Bank app; creates integration opportunities for Bank and the rest of the SA Composite Operating system Full behaviour chassis in the for the SA composite Bank app, leveraging the Bank’s digital banking capability and da
Slide 45: Bank Digital Integration
BANK DIGITAL INTEGRATION Health Life Insure Invest Vitality Full behavioural Shared-Value chassis through rewards the Bank app currency Access the Health Ecosystem from the Bank app Access the Health Ecosystem Access your Discovery Life Access your Discovery Insure Access your Discovery Invest from
Slide 46: Unique Discovery Ecosystems
UNIQUE DISCOVERY ECOSYSTEMS Travel Home Health Fitness Flight bookings ±940k Discover View BOOK AM J J A S OND J FMAM J Lounge visits Choose from >400 View the amenities, ±180k equipment, class facilities in South Africa schedules and location of the facility FLY Priority FastTrack Book Pay J J A S
Slide 47: The Future of Bancassurance | An Ecosystem Mindset
THE FUTURE OF BANCASSURANCE | AN ECOSYSTEM MINDSET Distribution Exclusive Embedded Shared-Value Model Partnership Insurance Bancassurance Banks distributing Insurance products Insurers partnering Behavioural Banking with insurance products tailored to the with Banks to create personalised embedded a
Slide 48: SA Composite
SA COMPOSITE ±58% Market Share ±28% New Business Market Share Top 3 in net flows Best Fuel Rewards Best Digital Bank in South Africa AMBITION 2026 35% 18 70% 50 000 2500 16 45 000 30% R’m, rebased to 100 as at 31 Dec 2007 (inception) 60% 40 000 14 2000 25% 35 000 50% 12 30 000 Discovery SA will be t