Discovery

Financial services organisation Discovery reported annual results to June 2025 during the third quarter, growing earnings per share by 30%, supporting its ambition to compound earnings at 15-20% between 2024 and 2029. Strong performances from a number of businesses in the group drove the outcome, but most encouraging was the result from Discovery Bank, which has achieved breakeven during the period. Discovery often refers to the bank as the “composite maker” – a term we think has merit. Currently, they are signing up over 1 300 clients per day, more than 60% of whom are new to the group and who over-index in younger and higher income cohorts. Having a banking offering allows for regular (in many cases, daily) digital interaction with clients, providing the ability to gather valuable data insights. This, in turn, allows for cross-selling of lending products (of which very little has yet been done), additional banking products, and, most importantly, other financial products within the group. The fact that other South African life insurers are building banks or cementing banking partnerships indicates the importance of having a digital banking relationship with the client. The bank is starting to scale strongly: while revenue per client was roughly flat in the period (and we would expect this to grow as the client base matures), the cost per client declined 20%. We think that management’s earnings growth targets for the group are stretchy, but attainable, and view Discovery as attractively priced at a forward multiple of less than 12x* with improving free cash generation.

*At the time of writing in October 2025

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