Nicolaas Kruger, CEO, The Momentum Group
Momentum Group Limited, the wholly owned life insurance subsidiary of the FirstRand Group, posted group operating profit growth of 23% to R721 million for the 6 months ended 31 December 2009, reflecting a strong operational performance and the positive impact of the recovery in equity markets.
Nicolaas Kruger, Chief Executive Officer of Momentum Group says the recovery in equity markets strengthened Momentum’s performance, but the residual impact of the waning recession is still evident.
Retail recurring new business declined by 18%. “The negative economic environment and the implementation of the new commission regulations in January 2009 had a significant impact on recurring retirement annuity and endowment policy new business. However, in line with the recovery in personal disposable income of South African households, we are also seeing a decline in early terminations,” says Kruger.
Retail lump sum new business on the other hand saw a 14% increase, underpinned by improved investment performance from RMB Unit Trusts, which won several awards in 2009, including three Raging Bull awards.
There was continued strong growth in the entry-level market through FNB Life, which posted an excellent increase in recurring new business of 38%.
‘Through sound expense management Momentum Group limited the increase in marketing and administration expenses to only 1%. The rationalisation of multiple administration platforms in both the employee benefits and health administration businesses made a significant contribution to this improvement in efficiencies’ says Kruger.
Momentum’s healthcare business in South Africa increased the number of lives it administers over the year ended 31 December 2009 by 14% to more than 500,000 members. Momentum is also growing into Africa, with the total lives under administration increasing by 47% to over 100,000 at 31 December 2009. “Although the main focus is currently on healthcare funding, our product diversification strategy will also be implemented in Africa by offering retail life insurance and employee benefits solutions to the 11 African countries we operate in,” says Kruger.
The investment performance of Momentum’s asset management businesses remains a key focus area for the company. “We are happy with the continued improvement in the investment performance of institutional, as well as retail products, as reflected in the recent awards won by our unit trust funds,” says Kruger.
Momentum remains strongly capitalised with a CAR cover ratio of two times its capital adequacy requirement at 31 December 2009. “We are satisfied with Momentum’s excellent return on equity of 22%. Our annualised return on embedded value of 28% in difficult trading conditions is particularly pleasing,” says Kruger. Equally strong contributions to Momentum’s embedded value profit from operational performance and investment markets increased the company’s embedded value to R17.8 billion at 31 December 2009.
“Momentum is geared to benefit from the economic recovery and we look forward to a successful 2010, not only for our business and clients but for all South Africans as we welcome the world to an historic sporting event,” concludes Kruger.
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