Discovery's strategy in South Africa of building quality business of scale with significant integration capability is increasingly mirrored by its approach in the UK, where the health insurer plans to leverage the wellness and integration foundation of Vitality to offer enhanced health and protection offerings, according to Discovery chief executive officer Adrian Gore.

He said yesterday that during the past financial year, Discovery had restructured its business to facilitate this approach and had significantly increased its shareholding in the UK joint venture with Prudential plc from 50% to 75%, thereby boosting the scale and capability of its business in the UK market.

This was achieved by Discovery buying Standard Life Healthcare and merging it into PruHealth in return for a 25% increase in its share of PruProtect and PruHealth.

Gore noted that PruHealth's operating losses widened during the past financial year, aggravated by the economic recession, which had been shown to result in declining membership and increasing loss ratios.

"To address the environmental and performance issues experienced and to ensure PruHealth is positioned to capitalise on the market opportunities, key strategies were employed during the period," he said.

Firstly, PruHealth focused on attracting and retaining quality new business. Actuarial estimates show the quality of new business was significantly enhanced as a result.

Secondly, during the previous financial year and the first six months of the reporting period, work was done around Vitality and product features to bring down the cost of benefits.

During the period under review, certain operational functions were also incorporated into the South African operational environment, leading to a significant reduction in operational costs per life.

The business also incurred further restructuring costs that will position PruHealth for future operational cost reductions.