MMH results show record sales, highest ever death claims

Johannesburg – Momentum Metropolitan Holdings reported its financial year end results today for the year ended 30 June 2021 (F2021), which it says was a year of extremes. The Group reported that its normalised headline earnings declined by 34% to R1 007 million for the 12 months ended 30 June 2021, consisting of a 93% decline in operating profit, partly offset by an 80% increase in investment return. 

The insurer said its year-on-year decline of 93% in operating profit from R1 001 million to R73 million was largely attributable to the negative impacts related to Covid-19 in the current year, as well as anticipated future impacts from the third and possible fourth wave of the pandemic that is expected to emerge in the next financial year ending 30 June 2022. 

In F2021 the Group increased its additional Covid-19 provision by R2 239 million (net of tax), of which R2 129 million related to mortality. In the current year, it said a negative mortality variance of R702 million (after allowing for positive impacts from annuity products of R275 million and the release of R974 million of the existing Covid-19 provisions) was experienced, contributing to the Group’s total mortality losses for the year ended 30 June 2021 of R2 831 million.

Momentum Life and Momentum Corporate were most severely impacted and reported operating losses for F2021. The Group’s South African life insurance businesses paid R10.7 billion in mortality claims (gross of reinsurance and tax) during F2021, compared to an average of R5.6 billion p.a. over the three years preceding the pandemic.

Business units less directly exposed to Covid-19 (Momentum Investments, Momentum Metropolitan Health, and Non-life Insurance) showed strong operating profit growth during the year. Metropolitan Life and Momentum Metropolitan Africa both produced solid operating profit for the period despite significant Covid-19 related excess claims.

The Group said given its strong presence in life insurance, the abnormally high number of deaths experienced during this year, and the need for additional provisions against adverse mortality experience for an extended period, had a significant negative impact on our results. However, despite the adverse impact of Covid-19, it reported many of its businesses as having continued to perform very well. 

The insurer highlighted what it said was its excellent new business performance in its investments and life insurance retail businesses, where both Momentum Investments and Metropolitan Life experienced record years.

A significant level of uncertainty remains over long-term impacts that Covid-19 may have on the Group. Most notably, our future mortality experience remains highly uncertain and is sensitive to the pace at which the vaccination programme is rolled out. Although the pace of vaccinations has increased over recent months, we believe that to curb the negative impact of the pandemic, the pace must be accelerated. The Group is supporting the national vaccine rollout by operating five mass vaccination sites, and by the end of August these sites have administered 175 000 vaccines.

The insurer said its investment returns increased by 80% to R934 million and were supported by the recovery of investments markets, fair value gains from the revaluation of the Group’s investment in venture capital funds, and the recovery of previously written-off loans. This was partly offset by lower investment returns on the shareholder investment portfolio within the South African life business due to short-dated interest rates being around 250 basis points lower than in the prior year.

The Group’s normalised headline earnings per share declined by 34% to 67.1 cents, while headline earnings per share declined by 57% to 30.9 cents. Earnings per share of 31.3 cents more than doubled due to a prior year impairment on the MARC, a partially owner-occupied property in Sandton, of R550 million, as well as a R244 million write-off of goodwill and other intangible assets on the Non-life Insurance operations that were not repeated in the current year.