Health insurer Discovery’s normalised headline earnings were up 20% to R2.8bn for the year ended June 30. However, its headline earnings declined 3% to R2.1bn over the same period. Endeavor South Africa Chairman of the board and Discovery CEO Adrian Gore told analysts on Tuesday this “paradox” had to do with how well its UK business, Prudential, performed.
When Discovery increased its stake in Prudential from 50% to 75%, the parties agreed that Prudential, as the minority shareholder, would have a “put” option to sell its share to Discovery from 2015.
In terms of accounting standards, Discovery has to include that 25% put option as a liability.
Given the rapid growth in the UK business, Discovery had to revalue the 25% stake at about R3.4bn, Mr Gore said.
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