All indications are that SA’s third wave of Covid-19 infections —and the deaths that will inevitably follow — are going to exceed levels experienced in the first and second waves.
On June 23, SA recorded 17,493 new cases in the preceding 24 hours, the biggest one-day spike in infections since the onset of the pandemic.
While that’s a big concern from a humanitarian point of view, it should also worry investors, particularly those with exposure to life insurers. Old Mutual said on June 23 — the same day SA recorded its biggest daily spike in infections — it was too soon to say if it needed to make additional financial provision to cover increased mortality claims. However, that trading update only covered the period to end-May whereas the full impact of the third wave is likely to become apparent several months from now.
By contrast Momentum Metropolitan CEO Hillie Meyer was already warning in March that a third wave was inevitable, saying that if the expected spike in infections exceeded the second wave the company would need to increase provisions.
Discovery, which has exposure to both health and life insurance, is likely to provide a useful barometer of the impact of the pandemic on the sector. It is scheduled to publish results on September 2. The numbers, as well as CEO Adrian Gore’s comments, are likely to be a useful indicator of the third wave’s affect on the insurance sector.
Until then it’s probably safe to bet on most insurers having to significantly ramp up their Covid-19 provisions.
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