Financial services firm, Momentum Metropolitan on Wednesday (9 September) reported a 51% drop in normalised headline earnings for the year ended June 2020, to R1.52 billion, including a loss of R251 million for the second half of the year.
The group’s headline earnings per share declined by 58% to 71.3 cents and earnings per share declined by 92% to 12.3 cents. No final ordinary dividend was declared.
The loss was due to additional provisions for Covid-19 of R983 million and the impact of investment market losses that amounted to R975 million. Excluding the impact of these two items, earnings from operational activities stood at R3.5 billion.
Momentum Metropolitan said its new business volumes, as measured by the present value of new business premiums (PVNBP), declined by 10%, to R50.5 billion.
Group finance director, Risto Ketola, said that excluding the impact of a R5 billion single premium with-profit annuity transaction in the prior year, the PVNBP remained flat year-on-year.
“This is a commendable achievement, considering the impact of the national lockdown and the slowdown in economic activity during the fourth quarter.”
The value of new business (VNB) declined by 48% to R280 million, illustrating the extent to which VNB is sensitive to new business volumes due to fixed costs in the distribution channels, the group said.
“We maintained our strict focus on efficiency initiatives. Our controllable administration expenses increased by 2%, well below inflation.
“Increases in expenses to accelerate developments of our digital capabilities and service platforms, as well as the cost to enable our staff to work from home, were offset by tight control on headcount and a reduction in items such as travel and entertainment – partially due to the lockdown restrictions,” said Ketola.
In Metropolitan Life, the sustained operational focus to improve the quality of business resulted in improved new business margins despite lockdown-related costs in its agency force.
The Non-life Insurance operations continued to deliver good growth, further supported by the acquisition and integration of Momentum Insurance (formerly Alexander Forbes Insurance). The businesses in other African countries contributed with positive earnings growth year-on-year.
The group said it continues to be well capitalised with a strong balance sheet.
“The pandemic will have a long-term negative impact on the economy. We expect to see weaker investment returns, lower new business, and weaker persistence levels in the medium term,” said chief executive officer, Hillie Meyer.
“However, we will continue to focus on matters under our control and build on our strengths and successes to date. We are determined to emerge from the current difficult situation in an improved relative position – in terms of market share, operational excellence, and use of evolving technology”.
In terms of financial outlook, Meyer said: “It will be speculative to provide firm guidance on our financial results for the next year, however, we will be disappointed if the group does not improve materially on the current year’s results.”