Momentum Metropolitan Holdings, which came about as a result of a merger between Metropolitan Holdings and Momentum Group in December 2010, is bracing for a third wave of Covid-19 infections this winter and says it may need to increase provisions again if a third spike in infections exceeds its expectations or if SA experiences a fourth wave in its next fiscal year.
The insurance and financial services group increased Covid-19 provisions by R655m net of tax for the six months to end-December, adding to the R983m in provisions announced in its results for the 12 months to end-June 2020. That combined provision amount of R1.638bn should be sufficient to cover it for “three waves”, provided the third expected spike in infections and deaths does not exceed levels experienced in the first wave, Momentum Metropolitan CEO Hillie Meyer said.
“Our provisioning will weather a [third] wave if it’s in line with the first wave,” Meyer told Business Day in an interview. “If it’s another wave with about 50,000 deaths, then we’re provided. If the third wave is in line with the second wave, then we will need more provisioning.”
Meyer said total excess deaths for SA since the start of the Covid-19 pandemic stood at about 140,000 at present, of which about 50,000 deaths were attributable to the first wave of infections that started in March 2020 and began subsiding towards the end of July 2020. That suggests that total excess deaths from the second wave were about 90,000, a level that would require increased provisions if repeated during an expected third wave, said Meyer.
Even so, Meyer said he would be “very surprised if the third wave is as severe as the second one”, given indications that large swathes of the population may have already been infected by the virus. Discovery Health said in February that, based on its analysis of excess death data, it estimated that up to half of SA’s population may have already been infected with Covid-19.
A study by the National Blood Service published on February 12 also showed that up to 63% of people in the Eastern Cape and 52% of those in KwaZulu-Natal have been infected by Covid-19 since the onset for the pandemic. The study, which tested for antibodies to the virus, found lower apparent infection rates in the Free State (46%) and the Northern Cape (32%).
Momentum Metropolitan’s normalised headline earnings dropped 43% to R1.012bn in the six months to end-December as it grappled with increased claims due to the pandemic, the company said on Thursday. Excluding the additional Covid-19 provisions of R655m, normalised headline earnings would have been 6% lower. The extra provisions cover additional mortality claims across Momentum Life, Metropolitan Life and Momentum Corporate, and additional expenses related to reinsurance cover for business interruption in Guardrisk, and for additional persistency losses in Momentum Metropolitan Africa.
The group’s corporate business, which largely provides group pension and life schemes to SA companies, reported a R212m loss in the interim period after it experienced 35% more claims than normal while average claims were also 20% higher than in a typical year.
“The second wave hit us very hard in our corporate business,” said Meyer, adding that working-age people were particularly hard hit during the second spike in infections.
“There were lots of claims from the medical professions sadly,” he said.
Meyer said the effect of Momentum Metropolitan’s corporate business on the group’s overall results was also compounded by its almost 20% market share for group schemes compared with the firm’s overall market share of between 10% and 12%.
“The numbers don’t look pretty,” Meyer said of Momentum Metropolitan’s, but added that the group’s balance sheet was strong.
On the positive side, Momentum Metropolitan’s new business volumes were up 14% to R30bn while the value of new business more than doubled to R334m. Momentum Investments delivered a particularly strong performance, with normalised headline earnings for the unit increasing by 56% to R440m in the period while normalised headline earnings for non-life insurance jumped 80% to R258m.
Momentum Metropolitan declared an ordinary interim dividend of 25c a share. The group’s shares were little changed at R17.18.
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