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Momentum Metropolitan reports strong earnings growth

08 March 2023 Momentum Metropolitan

Reinvent and Grow strategy on track

Momentum Metropolitan Holdings reported solid results for the six months ended 31 December 2022. Highlights include normalised headline earnings of R2.2 billion, 46% higher than the prior period. Operating profit more than doubled to R1.9 billion, which was largely attributable to an improved mortality experience and positive investment variances.

Group CEO, Hillie Meyer, was pleased with Momentum Metropolitan’s financial performance. “We delivered good earnings results which demonstrate that execution of our Reinvent and Grow strategy is on track. We are grateful to see the easing of Covid-19 related death claims and the positive mortality-experience variances in our main life insurance businesses. This indicates that the Covid-19 pandemic has reached its endemic phase. The quality of the earnings number is encouraging: it was a good all-round performance and without any significant positive one-off factors. While our earnings outlook has improved, our new business volumes did not meet expectations for some of the product lines, mainly as a result of the prevailing economic headwinds and lack of growth in the industry.”

Momentum Metropolitan declared an interim dividend of 50 cents per ordinary share, representing a 43% increase on the prior period. Normalised headline earnings per share increased by 49%, from 100 cents to 149 cents.

The Group repurchased R750 million of its own shares trading at a discount to Embedded Value (EV). This created an EV uplift of R583 million. The Board has agreed to a further R500m repurchase while the shares trade at a discount of more than 25% to EV.

Risto Ketola, Group Finance Director, shared his satisfaction with the positive impact of the disciplined capital management regime implemented a few years ago. “We are pleased with the 18.4% Return on Equity for the six months. The high return on capital, combined with strong cash generation, has enabled us, again, to declare a strong dividend and to continue buying back our own shares at the same time.”

Businesses that contributed most to the Group’s good results, include Momentum Life, which improved normalised headline earnings to R689 million from R30 million in the prior period. Momentum Corporate increased normalised headline earnings to R556 million compared to R370 million – this includes growth of 64% in operating profit to R494 million. Excluding the impact of the one-off items in the prior period, Guardrisk’s normalised earnings increased by 18%. Momentum Metropolitan Health’s normalised headline earnings improved by 55% to R146 million. The Health business’s good membership growth of 3%, despite a tough economic environment, was mainly attributable to the continued growth in the public sector and Health4Me divisions.

Looking ahead, Meyer said that the Group will continue to focus on executing their strategy to efficiently deliver value to its clients. “This disciplined focus, combined with the normalisation of mortality experience, means that we expect our earnings to be robust for the rest of the financial year. We are cautiously optimistic that we will achieve the Reinvent and Grow financial target range for F2024, namely normalised headline earnings of R4.6 billion to R5.0 billion and ROE of 18% to 20%.

“While our earnings outlook has improved over the past eighteen months, recent pressure on sales volumes indicate that South Africans’ disposable income remains under pressure due to rising interest rates, high inflation and the lack of economic growth in South Africa. This is likely to put ongoing affordability pressure on new business volumes.

We are a proudly South African company and will continue to invest and build our core operations, despite the numerous challenges our country is facing. If given the opportunity, the private sector can make a huge difference to improving our economic growth outlook. Over the last five years we have established a trend of success despite the pandemic and tough economic conditions. We will continue to focus on what is under our control to add value to our clients and stakeholders, and contribute positively towards building a better South Africa for all.”

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