South African health and life insurer Discovery and its existing United Kingdom joint venture partner Prudential have announced plans to enhance their relationship through the roll-out of life-assurance products into the British market, it was announced on Thursday.
Their joint venture will be consolidated into a new protection company to be provisionally called PruProtection, which will house two distinct businesses — PruHealth and a newly formed life-assurance company, PruLife. The latter will market life-assurance products in the UK based on those of Discovery Life.
Discovery and Prudential will make equal capital contributions to the venture, with Discovery expecting to contribute capital of about R1-billion over a five-year period. The amount of capital will be proportional to the success of the venture. Further funding will be provided in the form of financial reinsurance by Hannover Re.
Discovery will therefore earn 50% of profits while providing less than 50% of the required capital, which it will fund from its existing and internally generated cash resources.
Discovery CEO Adrian Gore said a pilot life-assurance product has already been launched in the UK, with an excellent response and strong support for the benefit design.
“The life-assurance market in the UK has become very commoditised, with little differentiation in terms of price or benefits, he said. “The market is very similar in this way to the PMI market we encountered in the UK before PruHealth was launched in 2004.”
Gore said that the integrated approach will offer more differentiation in both price and benefits, as well as offering rewards for policyholders who take steps to improve their health through Vitality.
“The current UK protection market is about 3,5 times larger than the South African market, with new business API of R11-billion,” he said. “We have seen with PruHealth the extent of interest in new-generation insurance and the Discovery model, with over 100 000 lives on the books in its first two years.”
The transaction is subject to Financial Services Authority and South African Reserve Bank approval.
Shaun Matisonn, currently CEO of PruHealth, will retain his position while taking the reins as CEO of PruProtection. A CEO for the life-assurance business will be appointed in due course. — I-Net Bridge