Mo­men­tum client ex­its to ‘surge’

• Group no longer ex­pects to achieve its tar­get of nor­malised head­line earn­ings

Business Day - - FRONT PAGE - Ntando Thuk­wana In­vest­ment Writer thuk­wanan@busi­nesslive.co.za

Mo­men­tum Metropoli­tan Hold­ings, which re­vised its earn­ings tar­get for 2021 on Thurs­day, says it ex­pects claims to surge and clients to exit poli­cies as the SA econ­omy faces a steep con­trac­tion and mil­lions of job losses.

Mo­men­tum Metropoli­tan Hold­ings, which re­vised its earn­ings tar­get for 2021 on Thurs­day, says it ex­pects claims to surge and clients to exit poli­cies as the SA econ­omy faces a steep con­trac­tion and mil­lions of job losses.

The group no longer ex­pects to achieve its tar­get of nor­malised head­line earn­ings of R3.6bn-R4bn for its 2021 fi­nan­cial year as a re­sult of the ad­verse ef­fects and un­cer­tain­ties re­lated to coro­n­avirus.

CEO Hil­lie Meyer said the com­pany ex­pects an up­surge in claims and the eco­nomic ef­fect of the virus out­break to knock con­sumer spending power.

“Our big­gest con­cern is not the im­pact on death claims and even less so dis­abil­ity claims. Our con­cern is more around the econ­omy.

Ba­si­cally, our clients will have less money, some of our clients will lose jobs, some of our clients will not get the in­creases they need,” said Meyer.

He was speak­ing af­ter the re­lease of Mo­men­tum’s earn­ings for its third quar­ter.

The in­surer said the coro­n­avirus, with the first case in the coun­try re­ported on March 5, has cost it R1.2bn. The dam­age Mo­men­tum suf­fered in March nul­li­fied its op­er­a­tional per­for­mance, push­ing it to a loss of R284m in nor­malised head­line earn­ings for the quar­ter, it said.

The com­pany has ruled out a rapid eco­nomic re­cov­ery, say­ing new busi­ness vol­umes will be af­fected. Covid-19-re­lated mor­tal­ity claims are a risk fac­tor that could af­fect its 2021 fi­nan­cials, Mo­men­tum said.

“We fore­see that [such mor­tal­ity claims] will prob­a­bly put pres­sure on our pre­mi­ums and the new busi­ness that we write in a given year,” Meyer said.

He ex­pects that Mo­men­tum’s client book, which nor­mally un­der­goes an an­nual re­duc­tion of 5%-8% — in­clud­ing fa­tal­i­ties — will be much harder hit in 2020.

“We’re look­ing ahead be­cause it’s early days. We haven’t seen the im­pacts of Covid-19 on dis­pos­able income yet and even on mor­tal­ity. That will play out over the next 12 months. So far it’s fine, but we are ex­pect­ing an in­crease in with­drawals,” said Meyer.

For clients whose risk is as­sessed to be high, in­clud­ing those with pre-ex­ist­ing con­di­tions, the com­pany may have to tread with cau­tion in terms of writ­ing new poli­cies, Meyer said.

“Our big­gest con­cern over the short term is sales vol­umes be­cause of the lock­down and so­cial dis­tanc­ing. It’s very dif­fi­cult,” he said.

Shares in the com­pany fell the most in a week on Thurs­day, down 3.41% to R17.

R1.2bn What the coro­n­avirus out­break has cost Mo­men­tum so far

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