The impact of the fourth wave of Covid-19 on Momentum Metropolitan Holdings’ South African life insurance businesses eased during the nine months to the end of March.
In a trading update, MMH said it paid out R8.9 billion in gross mortality claims. However, claims fell from R4.6bn in the first quarter to R2.5bn in the second quarter and to R1.8bn in the third quarter of its 2022 financial year.
Despite the improvement in the third quarter, MMH said its mortality experience was still slightly higher than before the Covid-19 pandemic.
The group recorded a net mortality loss of R278 million over the nine months to March because of higher death claims in Momentum Life (net mortality loss of R289m) and Momentum Metropolitan Africa (R123m) between July and October 2021.
It said the net mortality loss would have been higher without the net mortality profit of R100m between January and March.
The improvement in death claims resulted in MMH releasing significantly less of the mortality component of its Covid-19 provision between January and March than it did between June and December last year: R118m compared to R1.1bn.
The group released R1.336bn of its total Covid provision over the nine months, leaving R693m at the end of March.
MMH has decided not to raise additional Covid provisions. In September, it had to raise another R2.2bn for future Covid claims.
High rainfall affects Momentum Insure
MMH’s non-life businesses, Momentum Insure and Guardrisk, had, by 27 May, received claims to the value of R460m related to the floods in KwaZulu-Natal in April.
It expected to report a net loss (after tax and reinsurance) of less than R50m in the fourth quarter as a result of flood claims.
“Exceptionally” wet weather in the summer months saw Momentum Insure’s claims ratio rise to 69% in the first nine months of this year, compared to 65.9% in the same period last year.
It received claims directly related to damage cause by the weather, and there was an increase in motor vehicle accident claims.
“The rainfall was scattered and persistent, resulting in continuous losses, and no meaningful aggregation that could be claimable from the catastrophe reinsurance protection during the nine-month period,” MMH said.
The higher claims hit Momentum Insure’s normalised headline earnings, which declined from R92m to a loss of R14m in in the nine months of March this year.
Momentum Life dents the group’s VNB
The group’s operating profit grew by 26% to R1.736bn, supported by good earnings growth in Momentum Life, Momentum Corporate, Momentum Metropolitan Health and Guardrisk.
The decline in Covid claims saw MMH’s normalised headline earnings rise 46% to R2.588m for the nine months ended 31 March 2022.
New business volumes, as measured by the present value of new business premiums (PVNBP), increased to R54.5bn, 16% higher than in the prior period.
However, the value of new business (VNB) declined 16% to R423m, and the profitability of its new business also fell, with the VNB margin decreasing to 0.8%, compared to 1.1% in the same period last year. The group targets a long-term VNB margin 1.5%.
The group’s VNB decline of 16% to R423m was mainly caused by Momentum Life’s VNB declining from R55m to loss of R23m.
Momentum Life, which caters for middle- to high-income earners, saw its PVNBP decline by 4% compared to the prior period to R5.3 billion, mainly because of a 10% decline in volumes on new protection business. MMH attributed this to the tough economic environment.
However, Momentum Life’s normalised headline earnings improved from R208m to R338m, and operating profit increased 77% to R241m.
Net mortality losses, which were largely driven by the severe impact of the third wave on results for the first half of the financial year, improved to R289m from R335m in the first half of the financial year.
Segments that drove new business
New business growth was driven by Momentum Investments, Metropolitan Life and Momentum Corporate.
MMH said Momentum Investments delivered “strong growth” on Momentum Wealth’s local investment platform business and on life annuities, with PVNBP improving 14% to R33.3bn.
The VNB increased by 14% to R286m, benefiting from the increase in new business volumes and “an improved new business mix towards higher-margin annuities”.
Assets under management on the Momentum Wealth investment platform increased by 12% to R214bn, mainly attributable to positive market movements, good growth in new business inflows, and lower outflows. Institutional and retail assets under management increased by 15% to R510bn, mainly because of the recovery of investment markets and good inflows on the retail assets.
New business at Metropolitan Life increased 27% to R5.3bn compared to the prior period.
This was the result of a continued improvement in protection policies and in annuities and structured single-premium policies, which delivered year-on-year growth of 23% and 47% respectively. Long-term savings new business was up 23%.
However, the VNB declined 18% to R156m, largely because of the uptake of lower-margin savings products.
In the first three months of this year, there was an increase in policies that lapsed before the first premium was paid. MMH said that was, in part, the result of fraud by (now dismissed) advisers, which resulted in distribution expenses that could not be recovered.
Momentum Corporate continues to improve
Momentum Corporate’s new business increased 32% to R7.8bn. This was because of growth of 63% in recurring-premium volumes on group risk products. Single-premium volumes increased by 75%, driven by improved FundsAtWork investments and annuity sales.
However, the VNB declined from R9m to R2m, which MMH attributed to new business being weighted towards large risk-only clients with accompanying lower-margin products and smaller FundsAtWork schemes with lower margins.
Momentum Corporate’s normalised headline earnings swung from a loss of R72m to a profit of R617m in the first nine months of this year.
MMH said the segment’s recovery from an operating loss of R102m to an operating profit of R527m was largely aided by the improvement in mortality and disability claims.
Momentum Corporate recorded a net mortality profit of R8m as Covid-19 claims moderated, compared to a loss of R694m in the prior period.