Normalised headline earnings drop 32% to R711m amid net mortality losses of R327m
23 November 2021 - 11:10
UPDATED 23 November 2021 - 19:10
byAndries Mahlangu
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Momentum Metropolitan said on Tuesday that higher Covid-19 claims took the shine off its profits in the three months to end-September, a recurring theme for all life insurers.
In an operational update, the insurance company said it released R1bn worth of Covid-19 provisions to cover mortality claims as the third wave wreaked havoc in SA in particular.
The group’s SA life insurance businesses paid R4.6bn in mortality claims during the quarter, compared with a full-year average of R5.6bn before the pandemic.
The number of death claims in Botswana and Namibia over the same quarter was more than double the 12-month average for the 2021 financial year that ended in June.
Net mortality losses for the quarter amounted to R327m, driven mostly by losses in Momentum Life and Momentum Metropolitan Africa.
Normalised headline earnings thus dropped 32% to R711m. However, the present value of new business premiums rose 28% to R17.2bn, driven by a strong performance in Momentum Metropolitan Africa, Momentum Investments, Metropolitan Life and Metropolitan Corporate.
Graphic: KAREN MOOLMAN
“Momentum Metropolitan’s first [fiscal] quarter saw new business volumes remain high. However, these are at lower margins of 0.9% versus Old Mutual’s 2.3%,” said Karl Gevers, portfolio manager at Benguela Fund Managers.
“Similar to Old Mutual, mortality is higher than expected with Metropolitan using R1bn of its R2bn provision in the first quarter, increasing the potential for a shortfall by the end of the 2022 financial year.”
The group’s value of new business rose 48% to R157m, reflecting higher new business volumes, an improved mix towards higher margin products, and good expense management.
“While earnings could remain volatile, we continue to estimate that in the absence of extraneous shocks, the underlying level of normalised headline earnings for the group is about R800m to R900m per quarter,” Momentum Metropolitan said in a statement.
“We also believe that the Reinvent & Grow financial targets for [financial year] 2024 remain realistic, despite the modest macroeconomic backdrop.”
The company is aiming to achieve R4.6bn of normalised earnings by the 2024 financial year and a return on equity of 18%-20%.
The share price closed 1.43% lower at R19.32, giving Momentum Metropolitan a market value of R28.9bn.
Update: November 23 2021 This article has been updated with analyst commentary and the closing share price.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Covid-19 hits Momentum Metropolitan’s quarterly profit
Normalised headline earnings drop 32% to R711m amid net mortality losses of R327m
Momentum Metropolitan said on Tuesday that higher Covid-19 claims took the shine off its profits in the three months to end-September, a recurring theme for all life insurers.
In an operational update, the insurance company said it released R1bn worth of Covid-19 provisions to cover mortality claims as the third wave wreaked havoc in SA in particular.
The group’s SA life insurance businesses paid R4.6bn in mortality claims during the quarter, compared with a full-year average of R5.6bn before the pandemic.
The number of death claims in Botswana and Namibia over the same quarter was more than double the 12-month average for the 2021 financial year that ended in June.
Net mortality losses for the quarter amounted to R327m, driven mostly by losses in Momentum Life and Momentum Metropolitan Africa.
Normalised headline earnings thus dropped 32% to R711m. However, the present value of new business premiums rose 28% to R17.2bn, driven by a strong performance in Momentum Metropolitan Africa, Momentum Investments, Metropolitan Life and Metropolitan Corporate.
“Momentum Metropolitan’s first [fiscal] quarter saw new business volumes remain high. However, these are at lower margins of 0.9% versus Old Mutual’s 2.3%,” said Karl Gevers, portfolio manager at Benguela Fund Managers.
“Similar to Old Mutual, mortality is higher than expected with Metropolitan using R1bn of its R2bn provision in the first quarter, increasing the potential for a shortfall by the end of the 2022 financial year.”
The group’s value of new business rose 48% to R157m, reflecting higher new business volumes, an improved mix towards higher margin products, and good expense management.
“While earnings could remain volatile, we continue to estimate that in the absence of extraneous shocks, the underlying level of normalised headline earnings for the group is about R800m to R900m per quarter,” Momentum Metropolitan said in a statement.
“We also believe that the Reinvent & Grow financial targets for [financial year] 2024 remain realistic, despite the modest macroeconomic backdrop.”
The company is aiming to achieve R4.6bn of normalised earnings by the 2024 financial year and a return on equity of 18%-20%.
The share price closed 1.43% lower at R19.32, giving Momentum Metropolitan a market value of R28.9bn.
Update: November 23 2021
This article has been updated with analyst commentary and the closing share price.
mahlangua@businesslive.co.za
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