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Momentum Metropolitan continues to deliver robust earnings

27 March 2024 Momentum Metropolitan Holdings

~ Operating profit growth illustrates strength of core operations

Momentum Metropolitan Holdings reported robust earnings for the six months ended 31 December 2023. Highlights include normalised headline earnings of R2.4 billion, up 42% on the prior period, and a 69% increase in operating profit to R2 billion. Sales were strong with the Group’s present value of new business premiums (PVNBP) increasing by 18% to R39.1 billion, however, its value of new business (VNB) declined by 38% to R200 million.

Group CEO, Jeanette Marais, was pleased with Momentum Metropolitan’s financial performance. “Our business model of empowered, accountable businesses has again demonstrated its resilience and agility, enabling the Group to continue to report robust earnings and solid financial results while withstanding the challenging operating environment.” Marais noted the sustained pressure on the value of new business, despite the improvement in earnings: “Even though we managed to increase sales volumes, the high cost of acquiring new business placed our new business margin under pressure. We are giving significant attention to new business pricing, cost of acquisition and improving the sales mix”.

Normalised headline earnings per share increased by 48% from 113.7 cents to 168.0 cents with the per share growth rates benefiting from the share repurchases concluded over the past 18 months. The Group declared an interim dividend of 60 cents per ordinary share, representing a 20% increase on the prior period. In line with the Group’s capital management framework and in consideration of its strong capital and liquidity position, the Board has approved a further R500 million for future share repurchases.

Risto Ketola, Group Finance Director, shared his satisfaction that most business units performed in line with expectations. “This operating update is our first under the new International Financial Reporting Standard (IFRS 17) for insurance contracts, and we also used the opportunity to update our segmental disclosure to more accurately reflect the way the business is managed.” The prior year’s comparative earnings have been restated to be consistent with IFRS 17 and the new segments.

The Group’s businesses contributed as follows to the good results:
• Momentum Retail’s normalised headline earnings improved to R709 million from R382 million in the prior period.
• Momentum Investments delivered record new business sales volumes in life annuity sales, which contributed to its normalised headline earnings of R268 million.
• Momentum Corporate’s normalised headline earnings increased to R624 million due to the improved protection business claims experience and the refinement of its reinsurance strategy.
• Momentum Insure has made satisfactory progress with the corrective actions it has taken. Its normalised headline earnings improved from a loss of R70 million to a profit of R31 million.
• Metropolitan Life’s normalised headline earnings increased by 49% to R299 million, mainly due to an improvement in the persistency experience on protection business.
• Momentum Metropolitan Africa’s normalised headline earnings increased to R284 million, primarily aided by improved investment income from Namibia.
• The Momentum Metropolitan Health business achieved overall membership growth of 4%. Due to much of the growth occurring in lower margin business, their earnings declined marginally (by 5%) to R124 million.
• Guardrisk’s normalised headline earnings improved 3% to R360 million off a strong prior period.
• The R153 million normalised headline earnings loss in the India business represents an improvement of 7% due to significant growth in gross written premiums.

Marais expressed concern that the impact of South Africa’s economic stagnation, compounded by the ongoing electricity and water crisis, continues to place financial strain on all South Africans. “We firmly believe that challenges present opportunities for innovation and growth, and we will continue to provide our clients with advice, solutions and service that enable them to achieve their financial goals. The Group is on solid financial footing and is well-positioned to adapt to the evolving needs of our clients.

“Momentum Metropolitan is on track to achieve the objectives of our three-year Reinvent and Grow strategy by the end of this financial year. We are in the process of finalising our strategy for the period beyond F2024, which we will share with investors early in the new financial year,” Marais concluded.

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