Momentum Metropolitan CEO Hillie Meyer says emigration has become one of his biggest worries as the loss of wealthy citizens and skilled professionals is pressuring an insurance and investment industry faced with a shrinking savings pool.
“The rich and wealthy are leaving. I’m concerned about the number of people who can afford our retirement and pension products,” Meyer told Business Day in an interview on Wednesday after Momentum Metropolitan reported a sevenfold increase in annual profit.
“We’re dealing with a shrinking market and a shrinking savings pool, so something’s got to give,” he said. “This market isn’t big enough to accommodate all the players. We’ve got to scramble harder for our piece of the pizza, which isn’t growing.”
The total asset pool of SA’s collective investment scheme and life insurance industries has declined from R6.8-trillion at end-2021 to R6.49-trillion at end-June. That has largely been driven by financial market declines that have eroded the asset base of the two sectors, though weak economic growth and stubborn unemployment also undermine new member contributions, preventing growth of the total savings pool.
FNB senior economist Siphamandla Mkhwanazi told the recent tax indaba that one in five house sales in SA are due to emigration with 71% of sales by those aged 35 to 44, many of whom are wealthy individuals at the peak of their careers. The loss of such high-income earners is also eroding SA’s tax base.
“We did an analysis of our IT department and last year our turnover rate was 18%, whereas historically it was between 10% and 12%,” said Meyer. “The lack of business-friendly policies is hampering growth.”
Meyer’s grim outlook came after the group announced a 600% rise in profit to R3.80bn for the year to end-June. That allowed Momentum Metropolitan to declare a final dividend of 65c, taking the total shareholder payout for the financial year to 100c, the highest since 2017.
The company pointed out that its 2022 results are not directly comparable to last year’s, which were affected by the Covid-19 pandemic.
Meyer said he is cautious on the outlook for the 2023 financial year and does not think the company will repeat the R4.38bn in headline earnings achieved in the past year. He said that figure included a R500m write-up of the group’s venture capital portfolio that if stripped out would have resulted in a more moderate figure.
“If we can do about R4bn to R4.2bn next year it will be very good for us,” he said.
Meyer’s concern is driven by the weak domestic economy but he is also cautious about the lingering effect of Covid-19 despite the group having released R1.74bn of its opening pandemic provision of R2.03bn due to waning mortality. “We’re working off the assumption that Covid-19 is now endemic but our mortalities are still higher than before the pandemic.”
Momentum Life’s death claims in the final three months of the group’s 2022 financial year (April to June) topped R1.23bn, about 49% higher than the R829m in claims that occurred over the same period in 2020.
Momentum Metropolitan said the effect of the Competition Commission’s raid on its offices will be unclear until the regulator completes its investigations and possibly refers the matter to the Competition Tribunal. The competition watchdog raided eight of SA’s most prominent life insurers on August 25 over alleged collusive behaviour that included fixing of investment product fees and premiums for dread disease and life cover.
With Nico Gous and Hilary Joffe
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