Financial services group Momentum Metropolitan says slow-paced economic recovery in South Africa will likely impact on growth in new business volumes after recurring premiums for the quarter to the end of September fell 25% to R995 million.
Shares in the company shed as much as 2.25% to R21.48 in afternoon trade on the JSE yesterday although it is 7.88% up in the past seven days. The company said it was concerned about economic conditions in South Africa that could impact on business volumes.
“We remain concerned about the impact of the slow pace of economic recovery and higher interest rates on disposable income. This is likely to put pressure on new business volumes and persistency, particularly in Metropolitan Life,” the company said in its update for the quarter period to the end of September.
Momentum Metropolitan saw recurring premiums for the period sag 25% although single premiums were up 31% at R15.2 billion compared to the previous contrasting period. New business volumes rose 18% to R19.6bn although total direct expenses quickened by 9% to R2.9bn.
This came against the backdrop of the customer base for the Metropolitan Life subsidiary continuing to be “constrained by the current economic conditions,” despite the “lapse experience” in the protection business improving on a year on year basis.
Momentum Metropolitan has announced a share buy-back scheme. The company said that as of November 20, it had bought back 24 million shares at a total consideration of R498 million largely at a 38.7% discount. About 16.5 million of these share have since been cancelled.
Metropolitan Life was now aiming to attain a new business margin of 5% and normalised headline earnings of R600m. The company will pursue this increased focus on enhancing product commerciality, efficiently managing the channel workforce, improving business quality, aligning the cost base to revenue, and implementing migration and automation measures.
During the period under review, Momentum Metropolitan’s Indian health insurance associate reduced normalised headline earnings loss from R80m to R63m while net earned premiums increased 43% .
At group level, the present value of new business premiums increased by 18% compared to the prior period to R19.7bn, largely aided by a change in the discount rate used to calculate the present value of premiums.
“New business sales volumes in Momentum Investments continued to benefit from the strong growth in annuities. This sales growth was however partially offset by a decline in recurring premiums given a large recurring premium annuity deal written in the prior period,” the company said.
Underwriting performance in both the Non-life and Life insurance operations was largely in line with expectations for the period, it added. However, expenses across the group grew above inflation as a result of investments into capabilities and improvements to both client and adviser services.
The Momentum Insure division recorded a decrease in claims ratios to 66% against 70% in the prior contrasting period. This, said Momentum Metropolitan, reflected “the positive impact of underwriting measures Momentum Insure management took to address weak underwriting outcomes” over the prior 12 months.
An increase in assets under management, higher mortality profits and continued strong growth in annuity sales aided Momentum Investments’ earnings that are, however, now expected to be negatively impacted by a decline in investment variances due to changes in the shape of the yield curve and basis spread.
Momentum Wealth Investment grew assets under management by 14% to R240 billion, including “the positive impact of net flows on the local and offshore platform business, which was aided by the positive market performance” since the prior period.
Institutional and retail assets under management improved by 22% to R580bn during the quarter period to end September, largely as a result of the acquisition of Crown Agents Investment Management, a fixed income and multi asset manager in the UK, in April 2023.
“Momentum Investments’ new business sales volumes continued to benefit from strong growth in annuity new business volumes, offset to some extent by lower new business volumes on the offshore platform. The business continues to invest in automation.”
Membership for the Momentum Medical scheme and corporate market segment nonetheless declined, an indication of “economic conditions placing pressure on employment numbers” within the corporate client base. However, earnings for Momentum Metropolitan Health improved during the September 2023 quarter following an increase in interest income.
BUSINESS REPORT