Momentum Metropolitan misses target due to Covid-19


Momentum Metropolitan misses target due to Covid-19

Published Date: 2020-09-10 | Source: Stephen Gunnion | Author: Stephen Gunnion

Momentum Metropolitan misses target due to Covid-19

The insurance group maintains its Reset and Grow strategy has placed in it a better position to manage the impact of the pandemic.

Momentum Metropolitan Holdings says it was on track to achieve its earnings target for the year until the Covid-19 pandemic started broke out in SA in early March. As a result, it fell short due to the impact of the pandemic on investment markets, its life operations and claims on non-life insurance business Guardrisk.

Under its three-year Reset and Grow strategy, introduced by CEO Hillie Meyer about two years ago, the insurance group was aiming for normalised headline earnings of between R3.6 billion and R4 billion for the year to end-June. While it missed its target for the year, with normalised headline earnings of R1.52 billion, it said the turnaround plan was the right strategy at the right time.

New business volumes declined by 10% to R50.5 billion for the year after the previous year's volumes were boosted by a R5 billion single premium annuity transaction. The value of new business (VNB) fell 48% to R280 million because of the sensitivity of VNB to new business volumes due to fixed costs in the group's distribution channels.

The group reported a loss of R251 million for the second half of the year due to additional provisions of R983 million for Covid-19 and the impact of investment market losses that amounted to R975 million. Excluding the impact of these two items, it said earnings from operational activities would have reached R3.48 billion.

Headline earnings per share for the year declined by 58% to 71.3c and earnings per share came in 92% lower at 12.3c. It hasn't declared a final dividend.

Due to the weaker investment markets in the final quarter of its financial year and additional provisions against the impact of Covid-19, its return on embedded value declined to negative 3.7% from 8% in 2019. The solvency capital requirement of its main life insurance subsidiary decreased to 1.85 times from 2.08 times, remaining close to the midpoint of its target range of 1.7 to 2.1 times. It said it remained well capitalised with a strong balance sheet.

Momentum Metropolitan said it expected the pandemic to weigh on investment returns, new business and policy retention in the medium term. While it didn't give guidance on earnings for the year ahead, Meyer said he would be "disappointed if the Group does not improve materially on the current year's results".

Its shares rose 4.2% to R15.81 yesterday.

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