Momentum Metropolitan’s new business volumes declined by 8% to R50.1 billion in the nine months to the end of March 2023 compared to the same period in 2022, mainly because of lower volumes in Momentum Investments and Momentum Metropolitan Africa.
Despite this, the financial services group’s normalised headline earnings (NHE) increased by 29% to R3.351bn, the company said in an operating update on 30 May. The growth in profits was supported by lower death claims as the impact of Covid-19 receded.
Operating profit jumped 70% to R2.951bn, underpinned by lower death deaths in Momentum Life, Momentum Corporate, and Momentum Metropolitan Africa, and good fee income growth in Momentum Metropolitan Health.
The group said the economic environment remained challenging, which will have an impact on the ability to attract new business.
“Economic activity continues to be hampered by rising interest rates, high inflation, and loadshedding.
“We are concerned about the pace of any potential economic recovery and the impact this will have on disposable income. This is likely to place ongoing affordability pressure on new business volumes, particularly on long-term savings and protection business, where we have already seen a decline in demand.
“Investment business is negatively affected by other factors, such as low confidence in South African asset classes and by consumer preference to maintain their assets in liquid low-risk investments,” Momentum Metropolitan said.
SA life business sales improve
Both Momentum Life and Metropolitan Life saw higher new business volumes, as measured by present value of new business premiums (PVNBP).
Momentum Life’s PVNBP improved by 5% to R5.6bn, bolstered by an 11% growth in long-term savings business, offset by a 4% decline in protection business. Protection new business volumes on an annual premium equivalent basis grew by 4% year-on-year.
Momentum Life’s long-term savings business exhibited strong growth, specifically on the more profitable retirement savings product lines.
NHE improved to R1.1bn from R338 million in the prior period, when earnings were dampened by the third wave of Covid-19 infections, resulting in higher death claims.
Metropolitan Life’s PVNBP increased by 2% to R5.4 billion, mainly due to good growth in single-premium guaranteed annuity business and a moderate improvement in recurring-premium long-term savings business.
Although Metropolitan Life benefited from lower death claims, its profits were down 2% to R389m, mainly because of policy lapses, particularly in the income protection business.
“The current economic conditions are placing pressure on this segment’s customer base, and lapse experience is expected to remain under pressure,” the company said.
Investment and group risk business declines
New business volumes were down in Momentum Investments, Momentum Metropolitan Africa, and Momentum Corporate.
Momentum Investments’ PVNBP declined by 12% to R29.3bn, which was largely due to new business volumes on Momentum Wealth’s local and offshore investment platforms falling by 16% and 13%, respectively. This was somewhat offset by an 8% increase in annuity new business volumes.
The segment’s profits decreased by 1% to R705m, which included a 12% decline in operating profit.
Operating profit was mainly impacted by lower new business sales and higher outflows on the Momentum Wealth platform. The decline in operating profit was further impacted by reduced earnings from the structured business, mainly attributable to lower mortality profits on annuities compared to the prior period.
Assets under management (AUM) on the local and offshore Momentum Wealth investment platform improved by 8% to R232bn, aided by favourable market performance and positive net inflows.
Institutional and retail AUM improved by 1% to R524bn, while structured and annuities assets under management improved by 10% to R34bn because of from higher flows compared to the prior period.
Momentum Metropolitan Africa’s PVNBP declined by 22% to R2.2bn, mainly due to the non-repeat of large corporate deals in Lesotho and Namibia, and lower retail new business volumes in Namibia and Botswana.
The segment’s NHE jumped 88% to R122m, which included strong growth in operating profit, mainly because of lower death claims in Namibia and Botswana.
Momentum Corporate’s PVNBP showed a slight decline of 1% to R7.7bn, largely attributable to lower new business volumes on group risk products. “The current economic conditions are increasing competitive pressure for group risk business,” the company said.
The segment’s profits grew by 42% to R877m compared to the prior period, bolstered by a further improvement in underwriting results in group risk products. This was aided by lower death claims, the release of Covid-19 reserves, a continued improvement in disability claims, and higher interest earned on assets backing liabilities.
Momentum Insure’s claims ratio rises
Momentum Insure reported a loss of R145m for the nine months, largely due to a high claim ratio of 78% compared to 69% in the prior period.
The impact of prolonged inflationary pressures on the cost of claims, increased frequency of incidents because of power surges, higher motor accident and theft claim frequency, a continuation of adverse weather-related events, and a lag in premium increases following the policy renewal cycle contributed to the higher-than-expected claim ratio.
The company said “an extraordinary proportion” of claims that occurred during December were reported late, resulting in the third-quarter claims experience being significantly worse than the second quarter and its expectations.
Gross written premiums increased by 7% to R2.309bn.
