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Momentum Metropolitan results show record sales and highest ever death claims

Published: Sep 8, 2021 7:00:00 AM South Africa Standard Time

Sharing Momentum Metropolitan’s annual financial results for the year ended June 2021, the Group’s CEO, Hillie Meyer, reflected on a year of extremes: “Given our strong presence in life insurance through a number of our businesses, Covid-19 had a severe impact on our financial results. However, despite the disruption that Covid-19 brought about, we are pleased that our Group performed very well operationally.

A highlight was the excellent new business performance in our retail businesses, where Metropolitan Life and Momentum Investments experienced record years, while Momentum Life and our Africa businesses saw good new business volume growth.” Operating profit was boosted by an increase in investment return of 80% to R934 million and an increase of 31% in total new business volumes to R65.9 billion.

Momentum Metropolitan’s normalised headline earnings was down 34% to R1 billion for the 12 months. Operating profit declined by 93% to R73 million – largely due to the impact of Covid-19 claims. “We are in the business of paying claims. Our South African life insurance businesses paid R10.7 billion in death claims during the year, compared to an average of R5.6 billion per year over the three years preceding the pandemic. In addition, the Group made additional provision of R2.2 billion for an extended period of future Covid-19 claims,” said Meyer.

The 31% growth in new business volumes came on the back of the Group’s Reset and Grow strategy which renewed the external focus in 2018. Not only has the sales footprint of Metropolitan Life been restored, with improved productivity, but Momentum-branded channels also increased footprint growth and support from independent financial advisers. The most dramatic improvement was evident in Momentum Investments, where the new business attracted on the Momentum Wealth platform increased by 51% year-on-year.

Risto Ketola, Group Finance Director, provided context that if the company was to exclude the impact of Covid-19 on claims and investment variances, the Group’s underlying normalised headline earnings were R3.5 billion. “The value of new business rose to R725 million from R280 million in the previous year, driven by strong new business volumes, excellent expense management across the Group, a sustained focus on improving the quality of new business written, and an improved mix towards higher margin products. This resulted in a significant improvement in new business margin from 0.6% to 1.1%.”

The Group’s normalised headline earnings per share declined by 34% to 67.1 cents while earnings per share more than doubled to 31.3 cents. The Group declared a final ordinary dividend of 15 cents per ordinary share. Together with the interim ordinary dividend of 25 cents per ordinary share, the previous year’s dividend of 40 cents per ordinary share was maintained.

Supported by a substantial improvement in investment markets and partially offset by additional provisions against the impact of the pandemic, the return on embedded value positively increased from -3.7% in FY2020 to 7.3% in FY2021. The Group remains well capitalised with a strong balance sheet.

Meyer cautioned that although the pace of vaccinations has increased over recent months, he believes that to curb the negative impact of the pandemic, the pace must be accelerated. “We have seen that vaccinations not only reduce infections, they also protect people from severe symptoms and hospitalisation, and improve their chances of survival. A faster rollout of the vaccination programme and achieving the stated objective to vaccinate 70% of the population, will certainly help to curb the pandemic to manageable proportions. The Group is supporting the national vaccine rollout by operating five mass vaccination centres, and by the end of August these sites have administered over 175 000 vaccines,” Meyer added.

Momentum Metropolitan’s Reset and Grow strategy, which was the cornerstone of the operational turnaround evident in its results over the past three years, has now come to an end. “We are in a significantly healthier position and have built a foundation and capabilities that improved our competitive position and created a strong foundation from where we can continue to grow,” Meyer said. “Our new three-year strategy, Reinvent and Grow, is mainly focused on an investment in digital initiatives to generate efficiencies and to improve the ease of doing business for our clients and advisers, growth of existing distribution channels and development of alternative opportunities, targeting normalised headline earnings of between R4.6 billion to R5.0 billion by FY2024. Through the targeted earnings growth as well as dynamic and disciplined management of group capital, we are targeting an improvement in the return on equity of the Group from around 15% to 20% by FY2024.”

Meyer concluded: “We are navigating through this challenging period with a strong solvency position and with sufficient liquidity to withstand impacts from the continuously evolving environment. I especially thank our employees for their resilience, perseverance and commitment, and our advisers and clients for their loyalty and support during the last year.”

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