Momentum riding the post-Covid wave
Momentum Metropolitan has seen strong profit growth, with the group benefitting from the declining death toll of Covid-19.
In its financial results for the year ended on 30 June 2023, the group said that its results were positively impacted by an improved mortality experience due to the smaller impact of Covid-19, and a healthy advancement in investment variances from advantageous shifts in yield curves.
“Normalised headline earnings reached a new historic high, exceeding our strategic target of R5 billion for the first time,” the group said
Normalised headline earnings per share jumped by 19% from 287.2 cents to 342.3 cents, whilst headline earnings per share grew by 5% from 297.3 cents to 310.7 cents. Earnings per share also grew by 20% from 260.6 cents to 313.3 cents.
In addition, operating profit grew by 31% from R3,363 million to R4,419 million in the prior year.
Although the group said that Momentum Life, Momentum Corporate, Guardrisk and Momentum Health produced satisfactory results, Momentum investments saw a decline in profits.
It said that this was mainly due to the smaller mortality profits from annuities and lower new business
sales on the Momentum Wealth platform.
“Operating earnings in Metropolitan Life were mainly impacted by unfavourable lapse experience on the protection business, as well as assumption changes reflecting operating headwinds,” the group said.
The group’s Non-life Insurance segment was also impacted by a higher claims ratio and premium increases, which remained lower than rising claims inflation.
“Africa saw a significantly improved result primarily due to positive investment variances and mortality experience, as well as actuarial basis changes,” the group said.
However, the group said that the investment return from the group’s shareholder assets dropped by 35% to R660 million from the previous year, which was due to a significant fair value gain on the group’s venture capital investments in the prior year, followed by a modest negative movement in the current year.
Overall, the group upped its full-year dividend by 20% from 100 cents in FY22 to 120 cents in FY23. Below are some of the group’s key financial results:
Outlook
The group said that the normalisation of the mortality experience as Covid-19 enters its endemic phase and its disciplined execution of its strategy should lead to its earnings remaining robust in FY2024.
However, the group noted that the recent pressure on sales volumes remains a concern.
“Disposable income remains under pressure due to rising interest rates and high inflation, as well as the lack of economic growth in South Africa. This is likely to put ongoing affordability pressure on new business volumes, particularly on long-term savings and on protection business,” the group said.
“Investment business is negatively affected by other factors, such as low confidence in SA asset classes and by consumer preference to maintain their assets in liquid low‑risk investments.”
“The release of Covid reserves and favourable investment experience variances are unlikely to support earnings to the extent they have this year, we believe that the underlying run rate of earnings is approximately R4 billion per annum.”
Read: Retailers in South Africa under fire for high food prices – load shedding is no excuse
Loading ...