Johannesburg — DISCOVERY Holdings , the fast- growing life assurance and private medical schemes group, far outran the recession by lifting headline earnings 33% to R1,24bn in the year to June 30 this year, with all its operations reporting strong growth in new business.

Operating profit rose 32% to R1,7bn. New business annualised premium income, excluding Destiny Health, increased 20% to R5,78bn.

The total dividend for the year increased 31% to 58,5c per share and the diluted embedded value per share rose 12% to R35,83. The share price traded slightly lower at R27,60 yesterday.

CE Adrian Gore believed the group grew strongly because of its "unique" position in the market, the "focus on innovation" and "the quality of the group's distribution" through about 5500 brokers and a tied agency force that had generated about 20% of Discovery Life's new business.

Discovery Health, SA's leading medical scheme administrator, performed well by growing its reserves by more than R700m. These were expected to reach R6bn by year-end. It added 45000 members in the year.

Discovery Health's network arrangements expanded, with its general practitioner network covering nearly 80% of members and its direct payment arrangements with specialists growing to cover 85%. The Delta Plans and enhancements to the KeyCare Plans for lower-income earners, implemented in January , had unlocked cost savings for consumers.

Discovery Health Medical Scheme's contributions had grown in line with the regulatory target of inflation plus 3%, and benefits had grown faster than inflation. Between 95% and 100% of claims received had been paid, and next year this would be "substantially enhanced", said Gore.

He said Discovery supported plans for a national health insurance scheme (NHI) and although SA's gross domestic product could not afford a system the same as in the UK or the US, stereotyping the public health service as inefficient and private healthcare as wasteful was not beneficial.

Formulating the NHI would require the constructive co-operation among all stakeholders, he said. The life insurance division's profits grew 21% to R1,18bn and new business grew 31%, which Gore said made it the market leader in terms of new business.

Average lapses had slipped 20% and had breached embedded value assumptions, but earnings and the balance sheet were not affected. The increase in lapses was attributed to the tough economy, with the healthier policyholders tending to stay longer.

Discovery Invest, the "embryonic" investment division, lifted assets under management to R4,2bn, with growth at about R300m a month. The focus was on the higher margin retail market and Gore was confident the division would soon become profitable.

Discovery Vitality increased the number of its members 44% to 135568 and new services were expected in the next few weeks. The Vitality HealthyFood initiative had surpassed expectations, with Vitality members buying more than 715000 trolleys of healthy food in the first four months.

In the UK, PruHealth and PruProtect experienced strong new business in spite of the deep recession there, with PruHealth's membership growing 20% to 212000 lives. The recessionary environment had an effect on PruHealth's loss ratio -- as it had elsewhere in the UK's private medical insurance market.

Gore said PruHealth continued to focus on generating new business, growing the in-force book, and managing its loss ratio.

In the US, the wind-down of Destiny Health was going according to plan.