Momentum’s earnings drop

Momentum Metropolitan Holdings CEO Hillie Meyer tried his best to put a positive spin on the group’s results for the year to June 2020 in a presentation broadcast online and on DStv on Wednesday morning.

It is, after all, an insurance company’s calling to step up when things go awry.

He referred to the severe drop in South Africa’s gross deomestic product number, which was published just before he started his presentation, saying the economy obviously has a severe impact on an insurance company’s results.

This is particularly true in the case of the Momentum Metropolitan group whose interests span life insurance, investments, short-term insurance, medical schemes and banking.

The Covid-19 pandemic had impacted each of these businesses, with Meyer saying that everything was going well right up to the last few months of the financial year.

He noted that the pandemic was a severe test that has had a major impact on the economy and equally severely on

Momentum’s results, but that the results were “concrete evidence that the group’s strategy of reset and grow was working”.

Management said the group was on track to achieve its target of normalised headline earnings of between R3.6 billion and R4 billion for the financial year to June 2021, until the Covid-19 pandemic started to impact SA.

Momentum was impacted by an increase in claims, lower new business volumes, higher policy lapses and withdrawalsand additional operating costs.

All this happened within the last few months. Momentum posted a headline loss of R251 million in the second half of its financial year.

Headline earnings of R1.5 billion were 51% lower than the R3.07 billion of the previous financial year, largely as a result of additional provisions of nearly R1 billion for claims that could arise due to the ongoing Covid-19 pandemic and losses relating to policy cancellations.

Management also says that investment markets did not recover fully from the severe losses of the last quarter of the financial year – totalling net losses of R975 million for the year as a whole.

Meyer said earnings from operational activities amounted to nearly R3.5 billion.