Momentum Metropolitan Holdings (MMH) delivered normalised headline earnings of R4.383 billion in the year to 30 June, significantly higher than the R1.007bn in the previous financial year, following the less severe impact of Covid-19 on its operations.
Group chief executive Hillie Meyer said the prior year’s results were not directly comparable to the current year, because the 2021 results were severely impacted by the Covid-19 pandemic and included a net mortality loss of R2.823bn.
MMH recorded normalised headline earnings of R3.07bn in the 2019 financial year, and R1.521bn in 2020.
The group’s new “Reinvent and grow” strategy targets normalised headline earnings of R5bn by the end of June 2024.
Its mortality experience during the second half of 2022, affected by the fourth and fifth Covid-19 waves, was significantly less severe than during the first half, when the third wave caused substantial mortality losses.
MMH’s South African life insurance businesses paid R10.8bn in gross mortality claims in 2022, of which R4.6bn was paid in the first quarter of the financial year.
The group started its financial year with R2.03bn in total Covid-19 provisions (net of deferred tax) and released R1.743bn. Of the released provisions, R1.639bn related to the mortality component, of which R1.133bn was released in the first half of the financial year. The released provisions resulted in a mortality profit of R105 million for the full year after allowing for movements in pandemic-related provisions.
Despite the improvement in mortality experience, claims remain above pre-pandemic levels, the group said.
To withstand the impact of assumed sixth and seventh waves of Covid-19, additional Covid-19 provisions of R87m were raised by Momentum Life and Momentum Metropolitan Africa, while the remaining provisions in Metropolitan Life and Momentum Corporate were deemed to be sufficient against future Covid-19 claims. This brought the Covid-19 provision to R373m at the end of June.
New business volumes (as measured by the present value of new business premiums) grew by 10% to R72.673bn, driven by strong growth in Momentum Corporate’s recurring premiums on group risk products and single premium investments from large corporate clients. Momentum Corporate’s business volumes were up 49% compared to last year.
However, the group’s value of new business (VNB) declined by 14% to R626m. MMH attributed this, in part, to higher interest rates and consumers shifting towards lower-margin products across many of the business units.
VNB was lower than in the prior year across all the group’s business units, except Momentum Corporate, which delivered R68m (2021: R11m) due to higher sales volumes and “contained expenses”.
The group’s VNB margin declined from 1.1% to 0.9%.
Tight-lipped on the investigation
MMH’s commentary in its financial results did not shed much light on its attitude towards to the Competition Commission’s investigation into alleged price-fixing by eight of the country’s life insurers.
It said the company’s directors have concluded that the impact of the investigation on MMH would be unclear until the commission concludes its investigation and decides to refer a case to the Competition Tribunal for adjudication.
“Accordingly, given the preliminary stage of the commission’s investigation, these financial statements do not make provision for the commission’s allegations relating to contraventions of the Competition Act to the extent that they remain subject to further investigation, assessment and determination.”
Asked by Moneyweb whether he thought the commission’s investigation would uncover anything untoward, Meyer said: “I’m not aware of anything. I’m a veteran in this industry. I’ve worked in all departments. I’ve never in my career even heard of colleagues, or even colleagues with other companies, doing price-fixing. So, I don’t know. I would be surprised. But who knows? They must have something, otherwise they wouldn’t have done the raid, I imagine.”
Strong results from life insurance
All MMH’s South African life insurance business units grew their earnings last year.
Metropolitan Life, the group’s main life insurance entity, increased its normalised headline earnings by 54% to R672m.
Operating profit growth of 65% to R606m was mainly attributed to a net mortality profit of R219m, which improved from a net mortality loss of R468m in the prior year.
Metropolitan Life, which caters to the lower- and middle-income retail market, increased new business volumes by 22% to R7.2bn on the back of strong growth in protection new business, as well as annuities and structured single premium products.
Momentum Life, which focuses on the middle- and upper-income market, swung from a loss of R859m in 2021 to a profit of R1.11bn in F2022, as net mortality losses improved from R1.088bn to R358m.
It also benefited from higher interest rates, earning R53m from investments, compared to a loss of R517m last year.
But new business volumes declined by 3% to R7.291bn, which MMH attributed mainly to a 10% decline in new business on protection products, although sales of long-term savings products increased by the 4%.
Momentum Life was the only unit in the group to experience a decline in new life insurance business compared to last year.
Momentum Corporate’s normalised headline earnings improved from a loss of R552m to a profit of R1.17bn.
The business experienced a strong turnaround in 2022, delivering an operating profit of R1.049bn, up from an operating loss of R607m last year, following a net mortality profit of R257m instead of a net mortality loss of R1.344bn.
New business volumes increased by 49% to R12.3bn, boosted by strong growth in recurring and single premium flows.
Recurring premium new business increased by 79%, to R1.2bn, mainly on group risk products, including the onboarding of three large clients.
New business from single premiums increased by 97%, to R4.5bn, driven by improved investment flows into FundsAtWork and from large corporate investment and annuity sales.
Floods, inflation hit non-life business
Profits from MMH’s non-life insurance operations were dragged down by Momentum Insure, which, like the country’s other short-term insurers, was hit by weather-related claims, including the KwaZulu-Natal floods, and higher inflation’s impact on the cost of vehicle repairs. Momentum Insure also experienced “a large” commercial fire claim.
MMH reported a net loss (after tax and reinsurance) of R53m from KZN flood claims.
Normalised headline earnings from its non-life businesses fell 15% to R461m, as claims pressures saw Momentum Insure’s profits tanking by 93% to R12m, despite new business premiums increasing by 12% to R628m.
Cell captive provider Guardrisk, on the other hand, saw its normalised headline earnings increase by 19% to R449m. Its operating profit was aided by growth of 30% in underwriting profits of Guardrisk General Insurance, as well as growth in management fee income in the mining rehabilitation and life divisions.
By 30 June, Guardrisk had settled most of its business interruption (BI) claims, with only 64 claims with an estimated gross value of R110m outstanding. Momentum Insure had three BI claims with an estimated gross value of R18m outstanding.
