Momentum and Sanlam the only major life insurers to grow new business above pre-Covid levels, says PwC

Momentum Metropolitan Holdings (MMH) and Sanlam are the only major life insurers in South Africa to have grown the value of their new business relative to pre-Covid levels, according to PwC.

PwC based this conclusion on an analysis of the financial results of Discovery, Liberty Holdings, MMH, Old Mutual and Sanlam for the year to the end of December 2021 compared to their results in prior years.

PwC said although sales across the life industry as a whole seem to be growing again, “significant” macroeconomic headwinds, which will affect customer affordability, are expected to constrain growth in the short-to-medium term.

It said saturation might be limiting natural growth in some of the more affluent markets, but macroeconomic factors were also undermining growth in these markets.

Although the major insurers’ recovery from the pandemic was “pleasing”, the pre-pandemic comparison, coupled with the difficult medium-term macroeconomic backdrop, demonstrated “the need for the insurers to continue to innovate and invest on multiple fronts”.

According to PwC, the key performance indicators for the past decade show that real growth in profitability among the five major insurers was muted even before the Covid-19 pandemic. Combined International Financial Reporting Standards (IFRS) earnings grew with inflation and the value of new business margins trended slightly downwards.

To sustain profitable growth, insurers need to find new customers and address unmet needs while retaining ample margin.

In the past, insurers have been able to generate value from their investment strategies, but regulatory costs and constraints have meant that innovation with regard to products, integrated services and partnerships have proved to be essential drivers of financial success, PwC said.

‘VNB margin is a critical leading indicator’

The volumes and profitability of new business written are leading indicators of the future relevance and prosperity of the life industry. They reflect the current strategies of insurers and their effectiveness in delivering profitable growth into the future, according to PwC.

The VNB is the increase to an insurer’s embedded value over the year from writing new business, while the VNB margin is the VNB as a percentage of the present value of new business premiums (PVNBP).

PwC said the VNB margin is a critical leading indicator for the future success of the industry.

In 2021, the five major insurers achieved a VNB of R6.9 billion, significantly more than the R4.7bn in 2020. However, this was below the VNB for 2018 and 2019 of R7.7bn and R7.4bn, respectively.

Although the PVNBP increased by 13% from 2019, new business margins have not yet recovered to their pre-pandemic levels, leading to an overall reduction in the VNB.

The industry achieved VNB margins of between 2.7% and 3.1% in each year from 2011 to 2015. Although the industry was already experiencing some downward pressure over the period, margins continued to fall before the pandemic, to 2.4% in 2018 and 2.3% in 2019. They are still below pre-Covid-19 levels at 1.9% in 2021.

MMH and Sanlam achieved both growth and recovery of margins to pre-Covid levels in total, but the other three insurers have posted overall margins below those that they achieved in 2018 and 2019.

PwC’s analysis found that the following factors have contributed to each insurer’s VNB and VNB margin:


Discovery has achieved relatively stable volumes of new business over the past four years, as measured by the PVNBP.

Overall, growth in 2021 relative to 2019 is 3%. The VNB written in 2021 is, however, 25% lower than that written in 2019, at R1.9bn. This is a result of downward pressure on margins in its South African Life and Invest businesses and UK Life and Health businesses. The adjusting of assumptions to allow for Covid-19-related experience were cited as a major factor for this.


After a difficult year in 2020, where lower-than-expected value was added from writing new business, Liberty recovered partially in 2021, writing new business of R229 million. This is only 56% of the 2019 VNB, although volumes were 9% higher than in 2019, measured on a PVNBP basis. A much lower average margin in 2021 (0.5% compared with 1.0% in 2019) explains the decline.

A need to improve margins is reflected in management’s commentary on the results that the focus remains on improving revenue generated from sales and ensuring sales volumes are balanced with costs.


MMH has increased volumes significantly in its Momentum Investments and Metropolitan Life businesses relative to 2019. Overall, MMH’s PVNBP was 37% higher in 2021 than in 2019.

The margins for these two businesses were also better in 2021 than in any of the preceding three years, leading to an overall higher VNB margin of 1.09% (0.84%, 0.69% and 0.70% in 2020, 2019 and 2018, respectively).

The group’s total VNB of R791m is more than double that achieved in 2019 and 74% higher than that achieved in 2020.

However, performance was mixed across all businesses, with the VNB for Momentum Corporate and Momentum Metropolitan Africa slightly negative, and the largest business unit by embedded value – Momentum Life – achieving a VNB of only R31m in 2021.

Old Mutual

Old Mutual more than doubled its VNB in 2021 to R1.3bn, although it was still 32% lower than the R1.9bn achieved in 2019 and 40% lower than the R2.1bn achieved in 2018.

The Mass and Foundation Cluster accounts for most of the fall in VNB over the past few years, although all of the businesses have contributed to the decline.

A margin of 6.2% was achieved by this business in 2021, below the 8.7% – 10.6% achieved in the pre-Covid-19 years, but still within Old Mutual’s stated target range of 6% – 9%. Whilst its volumes are up 36% on 2020, the 2021 PVNBP is also below those achieved before the pandemic.

A further reduction in VNB for the Personal Finance business, driven by lower margins, and a lack of recovery of the Corporate business, whose volumes continued to decline, contributed to Old Mutual not yet being able to demonstrate a full recovery of VNB post-Covid.

Old Mutual’s overall VNB margin in 2021 is 1.9%, well below the margins above 3% achieved prior to 2019, but just below the stated target range of 2% to 3%.


Sanlam recovered well in terms of its sales performance in 2021, with a VNB 44% higher than that achieved in 2020, and 21% higher than in 2019.

The Sanlam VNB now accounts for 40% of the industry VNB, at R2.8bn.

The largest amount of growth in VNB over the past two years has come from the Emerging Markets business, where the margin in 2021 recovered to levels last achieved in 2018.

Although the margins in the South African Retail Mass business have not fully reached their pre-pandemic levels, a 50-basis point increase in VNB margin and rapidly accelerated volume growth represent the largest turnaround in VNB growth for the group in 2021.

Overall, Sanlam has demonstrated a strong sales position in recent years, maintaining overall new business margins in line with historic levels (the average VNB margin has mostly remained in the 2.5 to 3% range for more than a decade, with 2.87% in 2021), while at the same time achieving significant growth.

What could drive profitability in future?

PwC said the economy and competition were beyond the control of individual insurers. However, strategic drivers of growth in profitability could include:

  • There is still room to provide new solutions that meet customers’ evolving risk and savings needs in a more dynamic and effective way, including by providing holistic management of risk across prediction, prevention, intervention and insurance.
  • Partnerships that not only facilitate access to new customers and the delivery of sales, but also help in meeting customer needs in more holistic and effective ways.
  • Cost reduction. Costs could still come down as digital transformation efforts continue and insurers extricate themselves from legacy systems and outdated processes. Although some of the insurers reported reducing costs, the impact of doing so has not yet become visible in the results.
  • Customer response and expectations with respect to insurer behaviour, purpose and values (including ease of engagement).

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