- Momentum Metropolitan in the ended on 30 June paid double the value of death claims it usually pays.
- Because of the spike in death claims, the insurer suffered R2.83 billion in mortality losses.
- It has made an additional provision of R2.2 billion for an extended period of future Covid-19 claims.
Momentum Metropolitan Holdings' (MMH) operating profit tanked 93% in the 12 months to June because of Covid-19 claims. The Centurion-based insurer was forced to set aside an additional Covid-19 provision of R2.2 billion before tax. Of this, R2.1 billion was related to death claims alone.
MMH said in the year ended on 30 June, its total mortality losses – losses related to death claims – stood at R2.83 billion. The other contributor to the decline in MMH's operating profit was the group's provisions for anticipated future impacts of possible successive waves of Covid-19 infections.
"We are in the business of paying claims. Our South African life insurance businesses paid R10.7 billion in death claims during the year, compared to an average of R5.6 billion per year over the three years preceding the pandemic," said MMH CEO Hillie Meyer.
Meyer said although SA has increased the pace of inoculating people against Covid-19 in recent months, the pace must be accelerated.
"We have seen that vaccinations not only reduce infections, they also protect people from severe symptoms and hospitalisation, and improve their chances of survival. A faster rollout of the vaccination programme and achieving the stated objective to vaccinate 70% of the population will certainly help to curb the pandemic to manageable proportions," said Meyer.
How Covid-19 derailed MMH's targets
Momentum Metropolitan's normalised headline earnings – which stripped away once-off seasonal expenses and revenue that may impact the net income – declined 34% to R1 billion. Headline earnings per share declined by 57%.
MMH said excluding the impact of Covid-19 on death, disability, business interruption claims and policy lapses, its underlying normalised headline earnings would have been R3.54 billion.
So, had it not been for Covid-19, the group would have been closer to its "reset and grow" targets set in 2018. Back then, MMH envisaged that it would reach normalised headline earnings of between R3.6 billion and R4 billion by the end of its 2021 financial year.
The insurer recorded a 31% growth in new business volumes in the year under review, thanks to how it refocused its business under the strategy. The value of new business rose to R725 million from R280 million in the previous year. MMH's new business margin also improved from 0.6% to 1.1%.
"Not only has the sales footprint of Metropolitan Life been restored, with improved productivity, but Momentum-branded channels also increased footprint growth and support from independent financial advisers. The most dramatic improvement was evident in Momentum Investments," wrote MMH in the results announcement.
But that strategy has now come to an end without meeting the targets. Still, Meyer's happy with the progress.
"We are in a significantly healthier position and have built a foundation and capabilities that improved our competitive position and created a strong foundation from where we can continue to grow," he said.
MMH's new three-year strategy, called 'reinvent and grow', is mainly focused on investing in digital initiatives to grow the company's selling channels. It targets normalised headline earnings of between R4.6 billion to R5.0 billion by June 2024.