Momentum points to new business trends over the past quarter

Financial services company Momentum Metropolitan on Tuesday (24 November), showed signs of ‘recovery’ in an operational update for the three months ended September 2020.

The group increasing normalised headline earnings by 18% to R1.042 billion. This includes operating profit of R846 million which increased with 61% relative to the comparative (pre-Covid) period last year.

The release of Covid-19 provisions did not materially impact this positive result, Momentum Metropolitan. It noted that a 45% decline in investment returns due to current low interest rates slowed down the group’s overall performance – however, it still increased by 18% over the period.

Normalised headline earnings in Momentum Metropolitan Africa increased by 29% to R165 million, which was driven by the recovery of the investment markets across the region.

Earnings per share increased by 19%, while headline earnings per share increased by 26%. New business volumes increased by 22% to R675 million, the group said.

Hillie Meyer, Momentum Metropolitan Holdings Group CEO, said: “Our good results are partly because we efficiently attuned ourselves to the changes in the needs and behaviour patterns required as a result of Covid-19, and partly because the full economic impact of Covid-19 has not materialised yet.”

“We are pleased with the continued progress that we have made in each of the business units towards our Reset and Grow strategic objectives. Our employees remain instrumental to our continued success, and their contribution to the Group’s resilience over the past nine months of the Covid-19 crisis cannot be overstated.”

  • Momentum Investments’ operating profit grew 75% to R255 million and new business volumes increased by 30% to R8.7 billion compared to the prior year. This strong growth was driven by earnings from annuities and structured products, as well as good expense management. Value of new business improved from R30 million to R64 million mainly due to solid growth in new business volumes and an improved business mix.

  • Momentum Life’s operating profit was up 17% to R284 million, while new business volumes declined by 14% to R1.7 billion. Value of new business declined to R12 million, which represents a new business margin of 0.7%. This was offset by improved morbidity experience, improved persistency as well as contained operating expenditure.

  • Metropolitan Life’s operating profit grew 21% year-on-year due to premium collections remaining close to pre-Covid levels, a change in the business mix towards more protection products and containment of expenses, which were flat year-on-year. The business achieved growth in its value of new business of 31%, despite a decline in new business volumes of 15%.

  • Momentum Corporate’s operating profit declined by 2% to R85 million and new business volumes declined by 50% to R1.2 billion. This was driven by significantly weaker mortality experience from the group insurance business, which saw a large increase in deaths claims relative to the prior year. This was offset by a significant improvement in the disability experience, with both income and lump-sum disability products delivering positive results. Expenses were contained at below inflation.

  • Momentum Metropolitan’s health business delivered operating profit growth of 24% to R56 million, mainly due to an improvement in administration fee income and good expense management, as well as lower claims on insurance products due to members deferring elective and non-emergency care. Profit growth was backed up by a 1% increase year-on-year in health membership, a good result considering the impact of the pandemic and the constrained economic environment.

In the Non-life insurance businesses, normalised headline earnings were up 77% year-on-year. Guardrisk’s earnings declined by 3% to R85 million. This was mainly due to a further Covid-19 related provision for possible additional expenses related to renewal of reinsurance cover on business interruption cover, the group said.

Meyer said that that the Covid-19 pandemic is unfortunately not over yet, and its future progression remains uncertain. “The impact of Covid-19 and the challenging economic conditions globally and in South Africa will continue to be felt in our business for some time.

“Given the general decline in infections and deaths, we support the further opening of the economy to all sectors. However, we remain vigilant in safeguarding and supporting our clients and employees who are affected by Covid-19. We take heart from the new business trends across our retail business units that started to emerge during the quarter, and we believe that we continue to improve our competitive position.”

Read: South Africa’s UIF could collapse if Covid-19 payments are extended

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Momentum points to new business trends over the past quarter