Momentum Metropolitan, an insurance-based financial services company, says that mortality claims over the pandemic to date have been more severe than initially expected.
As a result, the listed group said in a trading statement for the 12 months ended June 2021 that it expects headline earnings to decline by between 50% and 70%, while normalised headline earnings per share are anticipated to be between 30% and 50% lower than a year ago.
Momentum Metropolitan said it would increase its provision against Covid-19 related mortality and disability claims experience by approximately R1.6 billion (net of tax) at the end of June. This is in addition to the increases in the Covid-19 provision totalling R0.7 billion (net of tax) reported for the six months ending December 2020 and for the nine months ending March 2021.
For the full year 2021, the group said it has experienced net mortality losses of R2.8 billion, consisting of the increase in the Covid-19 mortality provision of R2.1 billion and net negative mortality experience variance of R0.7 billion, after allowing for positive impacts from annuity products and the release of existing Covid-19 provisions.
The group’s South African life insurance businesses paid close to R11 billion in mortality claims in F2021, compared to an average of around R6 billion per annum over the three years preceding the pandemic.
Momentum Life was severely impacted, and from the start of the pandemic until the end of July 2021, the Myriad protection product paid R1.8 billion in gross mortality claims, where Covid-19 was reported as the cause of death.
“Momentum Life’s exposure is concentrated around Gauteng, Western Cape and KwaZulu-Natal, and claims are mirroring the national experience that reported a substantial increase in claims during the second and third wave of Covid-19 infections in these provinces,” the group said. The third wave is ongoing, and claims continue to be reported, Momentum said.
Momentum Corporate experienced an increase in mortality claims at all ages and saw more claims from members who are at higher salary levels and from members who are insured at higher multiples of salary, it said. This resulted in the average claim sizes increasing 33% from F2020 to F2021.
The average monthly claims in F2021 were nearly double the three-year pre-pandemic monthly average, Momentum said.
“During F2021, Metropolitan Life experienced approximately 20,000 more deaths than expected, representing 70% more deaths than expected. The average monthly claims in F2021 were also 70% higher than the three-year pre-pandemic monthly average.”
“Largely as a result of the increase in the Covid-19 provision, the group’s full-year results are therefore expected to reflect a decline in headline earnings per share and normalised headline earnings per share,” Momentum said.
The insurer will present its 2021 full-year financial results on 8 September 2021.