Discovery To Be Unbundled From Firstrand

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Myrrdin

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JOINT MEDIA STATEMENT FROM FIRSTRAND AND DISCOVERY




FOR IMMEDIATE RELEASE
4 September 2007

DISCOVERY TO BE UNBUNDLED FROM FIRSTRAND



FirstRand Limited today announced that following a joint agreement with Discovery, it intends to seek shareholder approval for the unbundling of the Group’s 57% shareholding in Discovery. A detailed announcement outlining the full terms and conditions of the transaction will be published prior to the announcement of FirstRand’s results on 18 September 2007.

Commenting on the decision, Paul Harris, CEO of FirstRand said:

“Discovery was established by Adrian Gore and his team in 1992 and FirstRand fully supported his vision to create a new paradigm in South African healthcare. Since its creation Discovery has delivered R 8 billion of shareholder value to FirstRand.

Following the decision in 2000 to allow Discovery to enter the risk market, shareholders increasingly questioned the merits of FirstRand having two insurance businesses competing in the same markets. The Group’s strategy was that “two horses in the race”, was producing significant growth, as both companies were growing at the expense of the competition and therefore not destroying shareholder value. This strategy was monitored on a regular basis by the Boards of FirstRand, Discovery and Momentum.

With Discovery now entering the investment market and Momentum’s growing presence in the health sector, both will increasingly be competing head on in all product areas and we have therefore agreed it is appropriate to fully un-bundle Discovery. This will liberate both companies, allowing them to pursue their respective strategies and we are confident that they will go from strength to strength.”


CEO of Discovery, Adrian Gore, added:

“The unbundling of FirstRand’s shareholding in Discovery is a point of inflection for Discovery, in that it removes any strategic conflict going forward and opens up many opportunities for the group.

From Discovery’s perspective, whilst we have appreciated the considerable value added by FirstRand we have had to be sensitive to the market-place competition between Discovery and other FirstRand companies. The unbundling removes any strategic constraints and provides Discovery with flexibility and increased scope for business opportunities.

It is also important to point out that RMBH was the original shareholder of Discovery and in effect – from a philosophical point of view – Discovery is now returning to the shareholder structure it had when it was formed in 1992.

In addition, the unbundling addresses the long-standing issue of Discovery’s small free-float and limited liquidity of shares.”

The current cross-directorships between FirstRand and Discovery will be reviewed and the appropriate changes communicated to shareholders in the detailed announcement to follow.



Ends

For further information please contact:

FIRSTRAND

Sam Moss Director Investor Relations 011 282 1341 or 082 490 9985

DISCOVERY

Grant Henry, Beachhead Media on behalf of Discovery, 011 214 2406 or 082 561 7172
 
Should have no material affect for policy holders of Discovery Life. The contract of insurance that you hold with them is still binding on the insurer - Discovery Life.
 
Why do I have this slight feeling in me, that the rats (Firstrand) are fleeing the sinking ship
 
It might be a case of no longer having the same way of doing business. Discovery might be perceived to be overtly aggressive, a little too fast and loose, shoot from the hip, consequences later type of organisation for the parent organisation. It might be a case of clashed cultures, the old and the new. Who knows! Sure looks interesting though.
 
on a side note, does nobody find it strange that about 35% of your discovery health monthly premiums go towards an "administration fee". worth taking up with your medical aid? very unethical things are orchestrated behind the curtains. this whole private healthcare system is more con-artistery than service delivery. what a joke.
 
The last I heard it was 10%. Could you direct me to where you got this information?

What we all have to remember is that Discovery started a new way of insurance and healthcare. Giving back to its members, much more than any other insurance or medical aid. If you look at all the things that are linked to your Discovery portfolio, it is not a bad product, but as all things new in South Africa, it will be looked upon with distrust. That's just the way it is.

And while all the other companies are slamming Discovery, what are they offering instead of? In the end it is all in the fineprint. Even the admin fee. But we South Africans are too lazy to read the contracts we receive, and then later we want to cry about all these things.

My advice to you, is to listen and read carefully. Ask questions and most importantly, keep your own eye on your portfolio. In the end, you are the one who has to live with your decision.
 
Actually the number is 17.1% which is far to high given their size.
 
Wynsam

I have visited your site on two occasions and am very interested about the way you do business.

People think if they pay for a risk cover policy, that their money is taken from them without any benefit. People have to keep in mind that they are paying for the priviledge of being covered in case they become disabled or are diagnosed with a severe illness. I've never heard anybody complain about receiving to much money when they become disabled. They always moan that it is to little. But when the broker/advisor calls on them to discuss these isues, they just never have the time, or they have enough cover - untill they are diagnosed with a severe illness. Then you will always hear "My broker/advisor did not tell me!"

I've tried to see what fees you charge for what services, but I cannot find any. If, for instance, I call your company and ask for an appointment. What will I be charged for? Are people really willing to pay a fee for our service. Or do they still see it at something to be done for free?

Personally I would be glad to work on a fee basis, do the analysis, give advice, work out the plan, implement the plan - all on a fee basis. And then I'll be able to sleep at night because I would not be bothered about cancellations because I wouldn't have to pay back commissions earned.

I agree, the admin is high at Discovery, but what other company has the same things to offer? The same benefits or even better? Isn't it a question of scrutinizing them because maybe they are better and they offer better?

What is keeping the bigger and more established companies from offering the same kinds of loyalty programmes and discounts and the retirement optimizing that Discovery has to offer?

What is the real problem here? Costs or other companies who have had the monopoly for such a long time and now loosing market share?
 
Angelface said:
Wynsam

I have visited your site on two occasions and am very interested about the way you do business. Good to know that it is used![/COLOR]

People think if they pay for a risk cover policy, that their money is taken from them without any benefit. People have to keep in mind that they are paying for the priviledge of being covered in case they become disabled or are diagnosed with a severe illness. I've never heard anybody complain about receiving to much money when they become disabled. They always moan that it is to little. But when the broker/advisor calls on them to discuss these isues, they just never have the time, or they have enough cover - untill they are diagnosed with a severe illness. Then you will always hear "My broker/advisor did not tell me!" We are quite fortunate that most of our clients understand the need for risk cover, we dont sell it, they ask for it and we advise if they have enough and which products are best suited to their needs..

I've tried to see what fees you charge for what services, but I cannot find any. If, for instance, I call your company and ask for an appointment. What will I be charged for? Are people really willing to pay a fee for our service. Or do they still see it at something to be done for free? People who are used to dealing with professionals have no issue to paying for such a service. It a mindset. People either understand or they don't. If someone cannot grasp the concept that anyone whose only way of earning income is to sell them something, is unlikely to give appropriate, never mind best advice, probably should not be a client of ours.

Personally I would be glad to work on a fee basis, do the analysis, give advice, work out the plan, implement the plan - all on a fee basis. And then I'll be able to sleep at night because I would not be bothered about cancellations because I wouldn't have to pay back commissions earned. Its a great space to be in.

I agree, the admin is high at Discovery, but what other company has the same things to offer? The same benefits or even better? Isn't it a question of scrutinizing them because maybe they are better and they offer better? None of the extras are a function of the medical scheme admin fee, they are all extras costed separately by the various Discovery companies. You must differentiate between Discovery Health -- the scheme and Discovery Health the administrator(seperate company very much for profit) and other various Discovery companies.

What is keeping the bigger and more established companies from offering the same kinds of loyalty programmes and discounts and the retirement optimizing that Discovery has to offer? I am not sure that they are all the best in the market place. The retirement product definitely has its detractors. Vitality is good for those who make use of it.

What is the real problem here? Costs or other companies who have had the monopoly for such a long time and now loosing market share?
Click to expand...
That question could fill books. Everyone has their own version of what is going on.
 
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Ok so now the big question. How much to charge. On what do you base your fee? And how do you work it out?

Do you let your clients choose between the two options.

1. Fee - without commission

or

2. Commission without fee
 
Angelface said:
Wynsam

I have visited your site on two occasions and am very interested about the way you do business.

People think if they pay for a risk cover policy, that their money is taken from them without any benefit. People have to keep in mind that they are paying for the priviledge of being covered in case they become disabled or are diagnosed with a severe illness. I've never heard anybody complain about receiving to much money when they become disabled. They always moan that it is to little. But when the broker/advisor calls on them to discuss these isues, they just never have the time, or they have enough cover - untill they are diagnosed with a severe illness. Then you will always hear "My broker/advisor did not tell me!"

I've tried to see what fees you charge for what services, but I cannot find any. If, for instance, I call your company and ask for an appointment. What will I be charged for? Are people really willing to pay a fee for our service. Or do they still see it at something to be done for free?

Personally I would be glad to work on a fee basis, do the analysis, give advice, work out the plan, implement the plan - all on a fee basis. And then I'll be able to sleep at night because I would not be bothered about cancellations because I wouldn't have to pay back commissions earned.

I agree, the admin is high at Discovery, but what other company has the same things to offer? The same benefits or even better? Isn't it a question of scrutinizing them because maybe they are better and they offer better?

What is keeping the bigger and more established companies from offering the same kinds of loyalty programmes and discounts and the retirement optimizing that Discovery has to offer?

What is the real problem here? Costs or other companies who have had the monopoly for such a long time and now loosing market share?
Click to expand...


The problem I have with Discovery as a medical aid is that their actual health benefits aren't that great. Sure, you can get discounts on movies and life insurance, etc, but I want my medical aid to be a medical aid, not a sports sponsor or a movie ticket discounter or a gym membership reseller.

And for some reason, a lot of companies are buying in to the whole Discovery concept, and force this on employees. So while there are medical aids out there that suit my needs far better, I have to go with the company medical aid.
 
Cathryn said:
The problem I have with Discovery as a medical aid is that their actual health benefits aren't that great. Sure, you can get discounts on movies and life insurance, etc, but I want my medical aid to be a medical aid, not a sports sponsor or a movie ticket discounter or a gym membership reseller.

And for some reason, a lot of companies are buying in to the whole Discovery concept, and force this on employees. So while there are medical aids out there that suit my needs far better, I have to go with the company medical aid.
Click to expand...

exactly the same with insurance companies. do you want to be paid out when you claim, or get a 'bonus' when you dont claim?





and yes, i really do think discovery's admin fee is closer to 35% than 17%. there's a lot of shaky deals behind the curtains that they obviously wont proudly display in print, for everyone to see. same goes for 'kick-backs' from certain large hospital groups. the whole medical aid/private service sector is in need of a bit of change.
 
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Ansbacher at centre of FirstRand dispute
Chantelle Benjamin


--------------------------------------------------------------------------------

Chief Reporter

A REPORT by a top forensic company into Ansbacher Trust, at the time FirstRand’s private banking arm, says it has found inconsistencies in financial statements for the years 2000 to 2002.

The document forms a key part of a court matter between FirstRand and a former consultant, Barry Spitz.

A Sunday newspaper yesterday quoted FirstRand director Laurie Dippenaar as saying Spitz had breached confidentiality by unlawfully disclosing to the media information about a customer’s offshore deal .

FirstRand spokeswoman Sam Moss said yesterday that the financial statements reviewed were “working papers” and not signed-off financial statements, which explained some e rrors referred to in the report.

Moss said FirstRand would go to court next week to prevent magazine noseweek from publishing the names of Ansbacher clients and the names of their offshore accounts, as promised by noseweek in its September issue.

The relatively minor civil case has also sparked interest because of the timing of FirstRand’s decision to unbundle from top medical aid provider Discovery, shortly after Discovery directors were linked to a controversial tax structure set up by Ansbacher.

Forensic company Horwarth Forensics, which was commissioned by Spitz to conduct the investigation and help him to prove that he had earned commission based on the income of the local Ansbacher unit, said it based its review on the documents it had been given by FirstRand .

Spitz went to court in 2001 over R2,3m which he said was owed to the International Law & Tax Institute, of which Spitz is a member, for consultancy work carried out in 1999 for Henry Ansbacher Trust Services. In a bid to prove he was owed the commission, he requested documents to prove Ansbacher’s earnings. What he received from FirstRand in the end appears to reveal a lot more, including alleged information on Ansbacher’s offshore tax structure and the involvement of some Discovery directors and other FirstRand clients.

Horwarth Forensics said in its January 2007 report on the Ansbacher financials that there were a number of inconsistencies in the statements .

“The nature of certain errors, including inaccuracies in seemingly computerised addition totals, appears to indicate manual human intervention and override, as well as poor (or) inadequate bookkeeping and accounting.

“Errors, mistakes and inconsistencies are so numerous and material that they serve to discredit the financial statements. This goes to the point that they cannot be relied upon with any degree of certainty.”

The forensic company found “unusual transactions and irregularities, including an invalid VAT number disclosed on various tax invoices”. It also picks up a transaction in two identified bank accounts, where dep-osits were made and repaid to clients on the same day.

It said: “Based on the short duration between the original deposits and subsequent repayments, this profit element is unusual.”

FirstRand has come to the defence of one of the people alleged to have received money in this manner, namely Discovery CE Adrian Gore. FirstRand has since said they were legitimate dividends earned from preference shares and deductions related to other fees owed by Gore to Ansbacher.

Dippenaar has told the media that he was not happy with how Ansbacher handled the administration of offshore tax schemes, but that the bank had believed that the scheme was legal.

Spitz was brought into Ansbacher Trust Services to advise on, among other things, offshore tax schemes following the South African government’s decision in 1998 to allow residents to invest up to R500000 offshore. There is dispute about why Spitz’s contract was cancelled. Spitz said it was because he would not do what he was asked because of legality concerns, while the company says he was not sufficiently skilled.
 
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