- Earnings: ZAR5.1 billion for the year, with underlying earnings viewed as ZAR4.2 billion.
- Earnings Per Share (EPS): Up 19% year-on-year.
- Dividend: Increased by 20% year-on-year.
- Return on Equity (ROE): 22% for the year.
- Embedded Value: Up 13% for the year, with a return on embedded value of 17%.
- Sales Volumes: Down 5% year-on-year.
- Value of New Business (VNB): Down 4% to ZAR600 million.
- New Business Margin: Flat at 0.9%.
- Operating Profit: Driven by changes in mortality experience and investment variances.
- Present Value of New Business Premiums: Decreased by 5% to ZAR69 billion.
- Momentum Life Earnings: Increased to ZAR2 billion, a ZAR1 billion jump from last year.
- Momentum Investments Earnings: Declined but remained at a high absolute level.
- Metropolitan Life Earnings: Declined due to quality issues and basis changes.
- Momentum Corporate Earnings: Strong recovery with significant mortality profit.
- Non-Life Insurance Earnings: Guardrisk had a phenomenal year with ZAR530 million in earnings.
- Momentum Insure Losses: ZAR300 million for the year.
- Africa Earnings: Significant recovery with a ZAR400 million swing.
- Cash Generation: ZAR5 billion in dividends paid by key entities.
- Share Buyback: ZAR500 million approved, totaling ZAR2 billion for the year.
- Capital Coverage Ratio: 2.1, above the target range of 1.6 to 2.
Release Date: September 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Momentum Group Ltd (NAM:MMT, Financial) reported exceptionally strong earnings of ZAR5.1 billion for the year, surpassing their earnings target for 2024.
- The company has successfully rebased its business to a higher level of performance, with a significant improvement in underlying earnings even during challenging periods like COVID.
- Momentum Investments has become the single biggest contributor to the group's value of new business, accounting for 78% of the group's VNB.
- The company has made significant progress in digital transformation, positioning itself as a disruptor in the industry with innovative projects like biometric mobile screening.
- Momentum Group Ltd (NAM:MMT) has a strong balance sheet, enabling a 20% increase in dividends and a ZAR500 million share buyback, reflecting robust cash generation and shareholder returns.
Negative Points
- The present value of new business premiums decreased by 5% to ZAR69 billion, indicating a decline in new sales.
- Metropolitan Life faced challenges with high lapse rates, negatively impacting normalized headline earnings and value of new business.
- Momentum Insure experienced a ZAR300 million loss due to severe claims and service challenges, exacerbated by weather-related claims and integration issues.
- The South African operating environment continues to present challenges and uncertainties, putting financial pressure on clients and affecting savings and insurance levels.
- Expense variances in the embedded value deteriorated in the second half of 2023 due to accelerated spending on projects and increased investment in systems.
Q & A Highlights
Q: Could you explain the sharp deterioration in expense variances in the embedded value for the second half of 2023?
A: Yes, Mike. We have accelerated spending on a number of projects, partly due to the very good results. For example, Momentum Corporate is going through a favorable underwriting cycle, which allowed them to fast-track some system decisions and projects. These are expenses that can't be capitalized as they involve exploring system options and pre-funding work around scheme closures. Essentially, it's a combination of increased real investment and the good underwriting results enabling some business units to advance their plans. - Risto Ketola, Group Finance Director
Q: What new business volume growth do you need in Metropolitan Life to avoid further negative expense variances and assumption changes?
A: The growth needs to be greater than inflation. Our unit cost assumptions assume a 6% increase per year. If our book grows by only 1% or 2% and costs increase by the same, it results in a shortfall. So, to avoid further unit cost changes, growth should be at least at the inflation rate or better. - Risto Ketola, Group Finance Director
Q: What are the key growth drivers that would see earnings hit the FY24 target of between ZAR4.6 billion to ZAR5 billion from the current base?
A: Achieving this target will require focus across all business units. Each ExCo member knows their accountability, and we must win back market share, manage costs, and improve all metrics. The target is broken down per business, and everyone knows what they need to deliver. It's about maintaining focus and ensuring no aspect is neglected. - Jeanette Marais, Deputy CEO
Q: What do you think is a sustainable underlying earnings run rate for Momentum Corporate?
A: We estimate it to be around ZAR700 million to ZAR750 million. It largely depends on how quickly the market reprices the latest mortality experience. We've moved from losses to profits, and as premium rates adjust, this will determine the sustainable earnings. - Risto Ketola, Group Finance Director
Q: How does the company plan to address the challenges faced by Momentum Insure and Metropolitan Life?
A: For Momentum Insure, we've resolved capacity issues and taken strong management actions, such as premium increases and policy cancellations, to bring claims ratios back to target. For Metropolitan Life, we have a five-point plan focusing on dynamic pricing, rigorous management of new business quality, and cost-saving initiatives to improve earnings and VNB margins. - Jeanette Marais, Deputy CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
