Momentum Metropolitan expects earnings to plummet as Covid-19 mortality claims rocket
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INSURANCE-BASED financial services group Momentum Metropolitan Holdings, in a trading statement for the 12 months to the end of June, expected its earnings to fall as much as 70 percent, knocked by 20 000 more Covid-19 mortality claims than expected.
It now expected headline earnings per share to decline by between 50 percent and 70 percent to between 21 cents and 36c.
The company is not alone, as other insurers have also paid the price of Covid-19. Liberty Holdings earlier this month said it had paid out a “staggering” 61 percent increase in death and disability claims to R8.5 billion in the six months to June 30, which reflected the severe toll that the Covid-19 pandemic was taking on clients, the group’s chief executive, David Munro, said.
Momentum Metropolitan, as of June 30, raised its provision against Covid-19-related mortality and disability claims by R1.6bn, net of tax, in addition to an increase in the Covid-19 provision of R0.7bn reported for the six months to the end of December last year and for the nine months to March 31.
“When Momentum Metropolitan reported results for the nine months to March 31, 2021, it was noted that the full-year 2021 results could be affected by the severity of the third wave of Covid-19 infections in South Africa.
In line with the steep increase in national experience, our mortality claims over the course of the pandemic to date have been more severe than what was initially expected,” it said.
However, it expected that its earnings per share could rise by between 115 percent and 135 percent to between 28c and 31c. In the prior year, earnings per share were negatively impacted by an impairment of R0.5bn on the MARC, an owner-occupied property in Sandton, as well as a R0.2bn write-off to the goodwill of the non-life insurance business.
As a result of the impairment and write-off of goodwill not repeating, the group’s full-year results would reflect an increase in earnings per share, it said.
For the full-year 2021, Momentum Metropolitan saw net mortality losses of R2.8bn, consisting of the increase in the Covid-19 mortality provision of R2.1bn and net negative mortality experience variance of R0.7bn, after allowing for positive impacts from annuity products, and the release of existing Covid-19 provisions.
Its South African life insurance businesses paid close to R11bn in mortality claims, gross of reinsurance and tax, in full-year 2021, compared to an average of about R6bn a year over the three years preceding the pandemic, it said.
Momentum Life was severely impacted, and since the start of the pandemic until the end of July, the Myriad protection product paid R1.8bn in gross mortality claims where Covid-19 was reported as the cause of death.
During full-year 2021, Metropolitan Life had seen 70 percent more deaths than expected. The average monthly claims were also 70 percent higher than the three- year pre-pandemic monthly average.
Momentum Corporate experienced an increase in mortality claims at all ages, and saw more claims from members who were at higher salary levels and from members who were insured at higher multiples of salary.
This resulted in the average claim sizes increasing 33 percent from full-year 2020 to full-year 2021. The average monthly claims in 2021 were nearly double the three year pre-pandemic monthly average, it said.
“Excluding the additional Covid-19 provision and net negative mortality experience variance, the group’s underlying performance during the last quarter of F2021 remained resilient, with earnings in Momentum Investments, Metropolitan Life and Momentum Metropolitan Health benefiting from strong new business revenue, further supported by good growth from the non-life insurance business, and strong investment returns on the shareholder investment portfolio,” the group said.
Its results for the 12 months to the end of June were expected to be released on September 8.
Momentum’s share price had fallen 2.82 percent to R19.62 by 1.17pm on the JSE yesterday.