Classic Business

Insurance group Discovery reported a 97% plummet in profits for the full year, as it braces for the fallout from Covid-19, with the group setting aside R3.4bn to cater for future Covid-19-related claims and policy lapses. Lower interest rates in SA and the UK also had an effect on policy values. There was a R4.8bn pre-tax effect on headline earnings, which fell 94% to R296m. Discovery’s embedded value per share is R107 and the market is valuing it at a R128 per share value: Therefore the Ping An, Discovery Insure, Partnership platform and bank are being valued at R20 per share value. Michael Avery spoke to CEO about what do he thinks the market is under-appreciating about Discovery and why? The worrying aspect of Discovery’s results is that members within existing employers is reducing due to retrenchments. This directly affects operating leverage within the business and the Discovery Health Medical Scheme business is the cash-cow for Discovery. It basically funds everything else.

Shelagh Gastrow, a provider of advisory services to the philanthropy sector

Cobie Legrange, co-founder of Rex Solom Invest

Peter Rule, Associate Prof in the Centre for Higher and Adult Education at Stellenbosch University

Faced with one of the biggest global economic shocks in history, it is not surprising that the majority of local investors reacted by changing their portfolios. What is surprising, however, is that almost a third of South African investors (31%) took the opportunity to raise their exposure to higher-risk investments. This finding, which mirrored a broader global trend, was revealed in the recently released Schroders’ Global Investor Study 2019 – an annual survey of more than 23,000 wealth investors, conducted across 32 locations around the world between 30 April and 15 June 2020. Having probed investors about their actions following a period of extreme market volatility – between mid-February and mid-March, when world stock markets lost approximately one third of their value– the study found that 64% of South African respondents made some changes to their portfolio as a result. 31% said they kept their investments “where they were”, while a small 5% were unaware of the turmoil in markets, and so took no action. Of the 64% who did change their holdings as the crisis unfolded, there was a stark divergence in response. A total 47% said they moved “some” or “a significant proportion” of their portfolio to lower-risk investments. But 31% took contrary action, saying they moved “some” or “a significant proportion” in to high-risk holdings. Kondi Nkosi, Schroders country head in South Africa, shares the findings with Michael Avery

CEO Osman Arbee & CFO Ockert Janse van Rensburg

Nadir Thokan, portfolio manager at Corion Capital

Brian Kantor, an economist and former chief investment strategist of Investec Wealth & Investment & David Holland, a co-founder of Fractal Value Advisors

Dr Yudhvir Seetharam, head of analytics, insights and research: FNB Business

Financial director Boipelo Lekubo