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Momentum Metropolitan’s operating performance continued to improve, but earnings lower due to Covid-19

Published: Mar 4, 2021 8:30:00 AM South Africa Standard Time

Group grows new business by 14% in difficult conditions

At its half year financial results announcement on 4 March 2021, Momentum Metropolitan Holdings reported good operating results for the six months ended 31 December 2020, including impressive new business growth, signalling good progress with the turn-around strategy announced in 2018.

Earnings were dampened by the second wave of the Covid-19 pandemic and the Group delivered normalised headline earnings of R1 012 million. This represents a reduction of 43% compared to the prior half year ended 31 December 2019. However, it is a significant recovery from the loss of R251 million that was reported for the second half of the F2020 financial year (i.e. January to June 2020).

New business volumes increased by 14% to R30 billion and value of new business more than doubled to R334 million. Embedded value per share increased to R27.39, up from R25.70 at 30 June 2020. The Group declared a cash dividend of 25 cents per ordinary share.

Group CEO, Hillie Meyer, said that he is pleased by the Group’s excellent operating performance. “If we exclude the additional Covid-19 provision (of R655 million net of tax) as well as the adverse mortality due to the pandemic, operating profit would have been 31% higher year-on-year. Our normalised headline earnings would have been in line with that of the previous period. It is worth noting that, in the first seven months of this financial year, we have paid R6 billion in claims, where we normally pay claims to the value of R6 billion during the entire year. We are in the business of paying claims, and we hope this amount would have brought some relief to the economy, our clients and their families.

“I am especially pleased that for both our retail businesses, Momentum and Metropolitan, the performance during this difficult period represents record sales – the best performance since the merger between Momentum and Metropolitan in 2010. This is testament to us winning back clients and intermediaries, and it shows that we continue to improve our competitive position.”

Risto Ketola, Momentum Metropolitan Finance Director, adds that the Group’s normalised headline earnings were also impacted by a R364 million decrease in investment return – a year-on-year decline of 75%. “The decline in investment return was caused by a combination of factors, including lower yields on secure short dated assets into which we invest the majority of our R13.5 billion shareholder investment portfolio, and a lower investable shareholder asset base following the R2.0 billion acquisition of Alexander Forbes Insurance in February 2020. To a large extent the good operating performance compensated for the decrease in investment return.”

Particularly hard hit by death claims resulting from the pandemic, Momentum Corporate was the only business unit that made a loss during the period. Not only did this business experience 35% more claims than normal, the claims were on average also 20% higher than normal.

The advantages of the Momentum Metropolitan Group’s diversified earnings base compensated for this with strong positive contributions from the following businesses:
  • Momentum Investments continued its growth trajectory with normalised headline earnings improving by 56% to R440 million. New business margins doubled during the period under review.
  • Metropolitan Life’s sales volumes increased by 1% to R2.6 billion compared to the prior period. This includes year-on-year growth of 17% on protection products. After reaching low levels during the Level 5 lockdown in 2020, adviser productivity has rebounded and by December 2020 reached its highest level since the merger that created Momentum Metropolitan in 2010.
  • Momentum Short-term Insurance delivered an increase in normalised headline earnings of 80% to R258 million. This includes operating profit which more than doubled from the prior period, highlighting the positive impact of the recent acquisition of Alexander Forbes Insurance.
  • Momentum Metropolitan Africa increased normalised headline earnings by 46% to R304 million. This result includes more than tripling operating profit to R190 million.

Looking ahead, Meyer concluded that the Group remains cautious about the secondary impact of the pandemic on the economy, as disposable income will remain under pressure, which in turn could dampen new business flows or increase contract terminations. “The Group is on a solid financial footing and is wellpositioned to adapt to the evolving environment and the changing needs of our clients. We are navigating through this challenging period with a strong solvency position and sufficient liquidity to withstand impacts from the ever-changing landscape. We will continue to invest in our core operations to take advantage of the opportunities for growth brought about by the current crisis. I thank our employees for their resilience and perseverance.”

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