Momentum Metropolitan's profit surges, but sales under pressure

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The decreased severity of Covid-19 helped Momentum Metropolitan increase its operating profit by 248% and headline earnings by 73%.
The decreased severity of Covid-19 helped Momentum Metropolitan increase its operating profit by 248% and headline earnings by 73%.
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  • As Covid-19 death claims start to subside, Momentum Metropolitan increased its headline earnings by 73% in the three months to end-September.
  • The insurance group released a three-month trading update on Tuesday.
  • But the group saw a decline in new business.
  • For more stories, go to the News24 Business front page.

The Momentum Metropolitan Holdings stable has seen a large improvement in its fortunes as the impact of the Covid-19 pandemic fades.

The group increased its operating profit by 248% from R299 million in the three months to the end of September 2021 to just over R1 billion, and its normalised headline earnings grew by 73% to R1.23 billion.

MMH said that this time last year its life insurance businesses, especially Momentum Life, were impacted by Covid-19 death claims, but the mortality experience has since improved significantly.

Momentum Life saw significant growth in its profits in the three months to 30 September. In the same period in 2021, Momentum Life had an operating loss of R3 million. This year, it recorded an operating profit of R330 million. Its normalised headline earnings jumped from R39 million to R353 million.

Click here to see Momentum Metropolitan Holdings' share price.

Metropolitan Life, which sells life insurance mostly to low-income consumers, also grew its normalised headline earnings by 110% to R176 million, from R84 million in the prior period. It also benefitted from lower death claims as well as better investment returns this time around.

But Metropolitan Life's earnings are starting to reflect the impact of struggling South African consumers. That business is experiencing lapses in its insurance products.

"The current economic conditions are placing pressure on this segment's customer base, and lapse experience is expected to remain negative in the short term," warned MMH in the trading update published on Tuesday.

While the decline in Covid-19 claims has boosted MMH's financials, the insurance group's new business volumes declined by 3% to R16.7 billion. The value of new business tanked 32%. Furthermore, the group's new business margin has shrunk to just 0.6% while the margin of its peers like Sanlam and Old Mutual sit comfortably above 2%.

Apart from the two life insurance businesses, Momentum Life and Metropolitan Life, MMH's other units also recorded significant growth in their earnings, save for the short-term businesses, Guardrisk and Momentum Insure.

Momentum Corporate's normalised headline earnings grew by 95% to R338 million. Momentum Metropolitan Health's normalised headline earnings moved from R48 million to R82 million. Momentum Metropolitan Africa's bounced back from a headline loss of R33 million in the prior period to R73 million. Guardrisk's normalised headline earnings declined by 22%, while Momentum Insure reported a loss of R16 million.

By midday, the group's share price was up almost 5%. 

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