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South African insurer Discovery
Holdings has acquired Standard Life’s health insurance unit
Standard Life Healthcare (SLH) for £138m ($100m) in cash. Trebling
membership of its UK health insurance business, the deal was struck
at a 47% discount to SLH’s £258.5m net asset value.

After closing of the deal, SLH will
form part of Discovery’s venture with UK insurer Prudential,
PruHealth, following which Discovery’s stake in PruHealth will rise
from 50% to 75%.

With an 8% share of the UK’s
private medical insurance (PMI) market SLH is the fourth-largest
private medical insurer and vastly increases PruHealth’s scale.
SLH’s 490,000 members will increase PruHealth’s total membership to
about 700,000 and annual premium income from about £50m to
£370m.

The deal also brings profitability,
which has eluded PruHealth since its establishment in October 2004.
SLH reported a profit before tax of £9.4m in 2009 while PruHealth
reported a £4.2m operating loss in the six months to December
2009.

The acquisition of SLH broadens
PruHealth’s access to expertise and provides a national
distribution network of agents and brokers, said Discovery CEO
Adrian Gore.

“This will significantly strengthen
our competitive position and provide the platform for strong future
growth,” he stressed.

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By GlobalData

For its part, Standard Life CEO
David Nish said that, while SLH is a successful business, given
Standard Life’s strategic focus on the long-term savings and
investments market the UK PMI is not a core business.

Discovery’s UK expansion follows its acquisition in late-2009 of
a 24.99% stake in Ping An Health Insurance, a unit of China’s
second-largest life company Ping An. Indicated deal price was about
$130m.

PRUHEALTH

Membership:
2005-2009

2005

25,000

2006

90,000

2007

150,300

2008

193,500

2009

219,000

Source: Discovery Holdings