Momentum CEO Forecasts SA’s economic Pain Putting a Strain on New Business

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Insurance company Momentum Metropolitan, which reported a double-digit drop in new business volumes, expects sales to take more strain as South Africa continues to suffer more economic pain, according to CEO Hillie Meyer.

Meyer was speaking to Moneyweb following the release of Momentum’s half-year results to the end of December 2022, which despite lower business volumes, saw earnings jump 46%.

Normalised headline earnings increased to R2.2 billion on the back of the Covid-19 pandemic phasing out. This resulted in a lower claims experience, which returned to pre-pandemic levels, the company said on Wednesday.

The value of the company’s new business volumes declined to R33.3 billion, with the Momentum Metropolitan Africa and Momentum Investments units contributing the most to the muted growth. New business in Momentum Metropolitan Africa declined 17%, while Momentum Investments saw a decline of 38%.

Meyer said the company’s flat premium income points to a battered economy and that this type of income is “just beginning to be impacted”.

He doesn’t expect to see meaningful growth in new business volumes “for a while”.

Meyer’s remarks follow Tuesday’s shock GDP print that showed that the South African economy registered negative growth of 1.3% during the last quarter of 2022. This was largely out of line with market watcher expectations, such as Nedbank’s economic unit which forecast a contraction of 0.4%.

In its results, Momentum said the trend will likely put ongoing affordability pressure on new business volumes, especially on its long-term savings products as well as business protection offerings.

In its Investment business, the company said it is negatively affected by factors such as low confidence in South African asset classes.

It said consumers are demonstrating a preference to maintain their assets in liquid low-risk investments.

While the company has started to see client policy lapses, this is still at manageable levels, said Meyer, adding that Metropolitan, Momentum Corporate, and Health are more susceptible to clients relinquishing the policies.

He said these divisions are largely saturated with products that cater to the employed market, which is facing risks resulting from South Africa’s unsustainable unemployment levels and companies seeing limited growth.

The impact will be felt in its employee benefit and health businesses.

“People at the bottom end of the market will probably feel the impact sooner or have already been trying to reconsider some of their financial services products,” he said.

“It’s just going to pour more pressure on consumers. I think the economic environment … will put pressure on the sustainability of our premium flows,” he said.

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