Business Maverick: Discovery’s red flags

Of all of the listed companies likely to be impacted by the arrival of NHI, medical scheme administrator Discovery appears to have been hit the hardest.and lays the groundwork for the establishment of a central fund that will purchase medical services for all in South Africa. While much about the Bill is not clear, what seems apparent is that the role of medical schemes will be limited to providingIn addition, the bill makes no provision for private scheme administrators.

As it turns out, some investors are concerned about Discovery’s balance sheet, and its accounting practices, which are said to be more ‘aggressive’ than the likes of Sanlam and others in the insurance sector. In this frazzled investment climate, investors are exceedingly cautious and any warning signs are enough to send them skittering out of the share.

In the first, Discovery changed its assumption relating to the length and cash flow profile of its in-force SA Life policies. It extended the duration of the contracts from 20 to 40 years and significantly increased the cash flow stream from year 20 onwards. Considering the Life business was only launched in 2001, this was definitely not conservative accounting – particularly as Discovery had seen a number of policies lapse closer to the ten-year mark.

“The inflation rate has not been this high in any of the past 120 months,” says Craig. “This is also well above the target ofHowever, this change added R5-billion to the value of these existing contracts, which means that Discovery shows a higher, growing stream of net cash flows relative to the lower flat stream of net cash flows from SA Life policies it would have shown before the assumption changes.

South Africa Latest News, South Africa Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

WATCH: Discovery Health on NHIDiscovery Health CEO Jonathan Broomberg talks to Business Day TV about the new legislation
Source: BDliveSA - 🏆 12. / 63 Read more »

Business Maverick: Huawei Founder Sees ‘Live or Die Moment’ From U.S. UncertaintyHuawei Technologies Co.’s founder Ren Zhengfei warned in an internal memo the company is at a “live or die moment” and advised underutilized employees to form “commando squads” to explore new projects. Workers who fail will have their salaries cut every few months and may lose their jobs, the billionaire said yesterday.
Source: dailymaverick - 🏆 3. / 84 Read more »

BUSINESS MAVERICK: Shareholders to Old Mutual board: Fix the drawn-out Moyo impasseFor the first time, the insurer’s institutional shareholders have voiced their concerns about the punch-up between Old Mutual and axed CEO Peter Moyo, which is playing out before the high court in Johannesburg. Shareholders have told the board to find a resolution to the protracted impasse and even consider a financial settlement. But they remain divided on the latter.
Source: dailymaverick - 🏆 3. / 84 Read more »

Business Maverick: Rico: Cartoon Tuesday
Source: dailymaverick - 🏆 3. / 84 Read more »

Business Maverick: Price Surge Spells ‘Hell’ for India Gold Sales as Demand WanesJewellers in India, the top consumer after China, are facing a bleak outlook as record-high prices and fading demand threaten to drag annual gold sales to the lowest in three years.
Source: dailymaverick - 🏆 3. / 84 Read more »

Business Maverick Analysis: Breaking the cycle of fear before it becomes a lasting panicFear has run roughshod over the financial markets over the past two weeks, sending US long bond yields down to levels never seen before. But do global economic fundamentals really justify such extreme moves or is the prospect of a self-fulfilling global economic recession on the rise? If so, what can we do to break this vicious cycle?
Source: dailymaverick - 🏆 3. / 84 Read more »