Momentum sees R2.5 billion in two-pot outflows
Momentum Group has seen billions flow out of retirement funds since implementing the two-pot retirement system.
Since the start of September, one-third of all retirement savings have been placed into a savings pot, which can be accessed before retirement.
The remaining two-thirds are put into a retirement pot, which will only be accessible upon retirement.
A third vested pot will hold all the retirement savings until implementation, minus R30,00 used as seed capital in the savings pot and will follow legislation from before the 1 September implementation date.
Momentum said it had received close to 150,000 withdrawal applications worth R2.5 billion.
The group said its corporate and retail savings businesses were well prepared to implement the two-pot retirement system and could process and pay withdrawals from the first business day.
“Our investment in digital solutions helped our teams manage the significant volume of client interactions,” said Momentum Group CEO Jeanette Marais in its financial results for the year ended 30 June 2024.
Momentum previously warned that most of its initial withdrawal requests came from people in the 40 to 49 age group, making up nearly 40% of applications.
The group said it was worrying that many people closer to retirement were withdrawing from their savings pot, as they may not have enough time to make up for the shortfall.
In addition, by 13 September, 60% of applicants indicated they were from low-income groups, earning too little to pay personal income tax, raising questions over how lower-income South Africans could retire.
Only 10% of applications were made by individuals suggesting they earn a taxable income of R500,000 or more annually.
Financials
The Momentum Group said that strong normalised headline earnings (NHE) of R4.4 billion for the year ended 30 June 2024, up 27% from the prior year. Operating profit also increased by 31% to R3.6 billion.
NHE per share increased 32% from 235.2 cents to 309.7 cents, highlighting the positive impact of the share buyback programme over the year.
Headline earnings per share jumped by 39% from 215.5 cents to 298.6 cents, and earnings per share improved by 29% from 220.0 cents to 282.9 cents.
The group also declared a final dividend of 65 cents per ordinary share, resulting in a full-year dividend of 125 cents per share.
“We are pleased that, despite the continued challenging economic backdrop, our results and earnings are strong,” said Marais.
“This was the outcome of positive contributions from most business units, including a recovery in Momentum Insure and Metropolitan’s earnings, solid life annuity profits from Momentum Investments, and strong underwriting experience in Momentum Corporate and Guardrisk.”
The group’s new business sales increased by 19% to R82.1 billion, as measured by the present value of new business premiums.
Businesses that contributed significantly to the increase in sales volumes were Momentum Corporate, which increased sales by 47%, Momentum Investments by 19% and Momentum Retail by 11%.
“We pride ourselves on our strong distribution capabilities, particularly in the Independent Financial Adviser market, where we hold a dominant position across most of our Momentum products,” said Marais.
That said, the value of new business (VNB) marginally declined by 2% to R589 million.
“Even though the VNB improved significantly in the second half of the year, our new business margins are not yet where they should be,” said Risto Ketola, Group Finance Director.
“Management will continue to focus on increasing sales volumes, improving new business pricing and the sales mix, and reducing acquisition costs. Each business unit has clear plans in place to address the VNB.”
As per a share buyback, the group bought back 23.6 million shares at an average price of R21.11 per share, representing a 43% discount to the 30 June 2023 embedded value per share of R36.94.
The Board approved a further R1 billion for the buyback programme of the group’s ordinary shares, which will take place now that the group is no longer in a closed period.
| Financials | FY23 | FY24 | % Change |
| Earnings (R million) | 3 191 | 3 936 | +23% |
| Headline earnings (R million) | 3 041 | 4 061 | +34% |
| Earnings per share (cents) | 220.0 | 282.9 | +29% |
| Headline earnings per share (cents) | 215.5 | 298.6 | +39% |
| Normalised Headline earnings per share (cents)* | 235.2 | 309.7 | +32% |
| Total dividend per share (cents) | 120 | 125 | +4% |
Future outlook
Although Marais has some concerns about the pressure on the group’s operating environment given the weak economic growth, she has seen some encouraging signs of improvement in the South African economy.
Momentum said that easing inflation and the latest 25 basis point interest rate cut will bring financial relief to clients. At the same time, the absence of load shedding should also help improve confidence levels.
“The fact that we were able to deliver these results despite the tough economy has boosted our confidence in our ability to deliver significant value to our clients and shareholders,” said Marias.
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