- Momentum Metropolitan Holdings says it had to raise another R1.6 billion in Covid-19 provisions at the end of June.
- All its life businesses recorded a surge in mortality during the third wave of Covid-19 infections.
- In the 12 months to end-June, its South African life insurance businesses paid close to R11 billion in death claims, compared to an average of around R6 billion a year over the three years preceding the pandemic.
Momentum Metropolitan Holdings (MMH) says Covid-19 death claims during the recent third wave of infections were more severe than the company initially expected.
The insurer, which is due to present its 2021 full-year financial results on 8 September, sounded alarm bells in March already, saying the third wave could be harsh on its bottom line if the death rates were not in line with what insurers expected.
Initially, most insurance firms expected the severity of the third wave to be somewhere between the first and the second wave. They expected fewer death claims than what they fielded between December 2020 and February this year. But the death rate proved higher than those expectations.
Now MMH said it is forced to increase its provision against Covid-19 related death and disability claims experience by approximately R1.6 billion after tax.
The R1.6 billion was in addition to the R700 million after-tax increase in the Covid-19 provision announced previously.
Momentum Life was severely impacted and its Myriad protection product paid R1.8 billion in gross mortality claims where Covid-19 was reported as the cause of death, the company said in a trading update released on Tuesday.
Momentum Corporate, the business unit that provides work-based insurance and other benefits, also experienced increased death claims across all ages. The business saw more claims from members who are at higher salary levels, which resulted in the average claim sizes increasing 33% from last year. The average monthly claims in the past year were nearly double the three-year pre-pandemic monthly average.
Metropolitan Life, which predominantly sells funeral cover products, experienced approximately 20 000 or 70% more deaths than expected. The average monthly claims in the past year were also 70% higher than the three-year pre-pandemic monthly average.
Altogether, MMH said in the 12 months to end-June, its South African life insurance businesses paid close to R11 billion in death claims, compared to an average of around R6 billion a year over the three years preceding the pandemic. The group experienced net mortality losses of R2.8 billion.
Because of these death claims and additional Covid-19 mortality provisions, MMH expects between a 50% and 70% decline in its headline earnings. Its normalised headline earnings per share will be between 30% and 50% behind what the group reported at the end of its 2020 financial year.
Its share price lost almost 3% in morning trading on Monday.
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