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MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 1
MOMENTUM METROPOLITAN HOLDINGS LIMITED MOMENTUM METROPOLITAN LIFE LIMITED
Incorporated in the Republic of South Africa Incorporated in the Republic of South Africa
Registration number: 2000/031756/06 Registration number: 1904/002186/06
JSE share code: MTM LEI: 378900E0A78B7549C212
A2X share code: MTM Company code: MMIG
NSX share code: MMT (Momentum Metropolitan Life)
ISIN code: ZAE000269890
(Momentum Metropolitan or the Group)
OPERATIONAL UPDATE FOR THE 12 MONTHS ENDED 30 JUNE 2022
Summary of key metrics
Key metrics F2022 F2021 Δ
Earnings per share (cents) 260.6 31.3 >100%
Headline earnings per share (cents) 297.3 30.9 >100%
Normalised headline earnings per share (cents)1 287.2 67.1 >100%
Normalised headline earnings (R million) 4 383 1 007 >100%
Operating profit (R million)2 3 363 73 >100%
Investment return (R million) 1 020 934 9%
New business (PVNBP, R million) 72 673 65 898 10%
Value of new business (VNB, R million) 626 725 (14)%
New business margin 0.9% 1.1%
Diluted embedded value per share (Rand) 29.77 27.08 10%
Return on embedded value per share 11.7% 6.3%
Return on embedded value 11.6% 7.3%
Return on equity3 22.7% 4.9%
Dividend per share (cents) 100 40 >100%
1
Normalised headline earnings adjust the JSE definition of headline earnings for the dilutive impact of finance costs related to preference shares that can be converted
into ordinary shares of the Group, the impact of treasury shares held by policyholder funds and the iSabelo Trust, the amortisation of intangible assets arising from
business combinations, Broad-based black economic empowerment (B-BBEE) costs and the amortisation of the discount at which the iSabelo Trust acquired the
Momentum Metropolitan treasury shares. The adjustment for the impact of treasury shares removes mismatches that are unique to financial institutions that invest
in their own securities on behalf of clients.
2
Operating profit represents the profits (net of tax) that are generated from the Group’s operational activities and reflects normalised headline earnings excluding
the investment return on shareholder funds.
3
Return on equity expresses normalised headline earnings as a percentage of start-of-year net asset value, adjusted for the items outlined in footnote 1, and the
adjusting items to determine headline earnings.
MOMENTUM METROPOLITAN EARNINGS SOAR
Declares strong dividend and solidifies competitive position
Introduction
We are pleased with Momentum Metropolitan’s financial results for the past year, and we are also encouraged by the progress made with
a wide range of strategic initiatives – the impact of which is not yet fully reflected in this set of results.
There was no single factor that caused the good outcome, but it is the result of almost all our businesses performing at, or close to
potential. The results were positively impacted by improved mortality rates, releases of Covid-19 reserves and positive investment
variances and returns.
Overview of financial results
The Group delivered normalised headline earnings of R4 383 million for the 12 months ended 30 June 2022, significantly higher than the prior
year. It is noted that the prior year’s results are not directly comparable to the current year as the prior year results were severely impacted
by the Covid-19 pandemic and included a net mortality loss of R2 823 million. The Group’s solid performance during F2022 follows the less
severe impacts of Covid-19 on earnings, with mortality starting to improve over the third and fourth quarters. With the positive earnings
impact from the partial release of opening Covid-19 provisions, mortality contributed positively to the normalised headline earnings of the
Group, by R105 million.
The current year’s results suggest that Momentum Metropolitan is on track to deliver the results targeted in our Reinvent and Grow strategic
roadmap. The operating environment, however, continues to present multiple challenges. Having started to recover from the effects of the
Covid-19 pandemic, South Africa has been hit by further shocks in the form of destructive protests and riots, severe flooding in KwaZulu-
Natal, frequent electricity loadshedding, high fuel prices, and rising food inflation. As Momentum Metropolitan we will continue to make every
effort to look after the financial needs of our policyholders and to generate value to shareholders despite this difficult backdrop.
2 | MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022
Operating profit improved significantly to R3 363 million, from R73 million in the prior year. This improvement was supported by the
improved mortality results, as well as a strong improvement in investment variances. All South African life insurance business units grew
operating earnings. Momentum Insure and Momentum Metropolitan Africa reported significantly lower operating earnings. Momentum
Insure was negatively affected by severe weather-related claims. Momentum Metropolitan Africa experienced large mortality losses in the
first half of F2022.
The Group’s investment return improved by 9% to R1 020 million, aided by the general recovery of investment markets, fair value gains
from the revaluation of the Group’s investment in venture capital funds, and foreign exchange gains on foreign currency-based assets.
Normalised headline earnings per share increased from 67.1 cents to 287.2 cents. Headline earnings per share increased from 30.9 cents to
297.3 cents and earnings per share improved from 31.3 cents to 260.6 cents.
The Group’s PVNBP was R72.7 billion, representing a 10% improvement from the prior year. This upswing was driven by strong growth
in Momentum Corporate’s recurring premiums on group risk products and single premium investments from large corporate clients,
specifically in the last quarter of the financial year. Metropolitan Life continued to achieve a strong increase in protection and annuity
PVNBP, while Momentum Metropolitan Africa also saw good new business growth, mainly from corporate business. Although Momentum
Investments new business volumes slowed in the fourth quarter, PVNBP for F2022 increased solidly by 2% on an already strong base
in the prior year. Momentum Life PVNBP declined year-on-year but showed encouraging new business growth in the last quarter of the
financial year compared to the first three quarters.
The Group’s VNB declined by 14% from the prior year to R626 million. The decline is partly due to the negative impact of yield curve related
economic assumption changes and a shift in new business towards lower margin products across many of the business units. These
factors that drove VNB lower were partially offset by strong VNB growth in Momentum Corporate and good expense management across
the Group. The new business margin of 0.9% is lower than the prior year’s margin of 1.1%.
The regulatory solvency positions of all the Group’s regulated entities remain within, or slightly above, their specified target solvency
ranges. For Momentum Metropolitan Life, the Group’s main life insurance entity, the Solvency Capital Requirement (SCR) cover improved
from 1.73 times SCR at 30 June 2021 to 2.03 times SCR at 30 June 2022. This improvement is mainly attributable to higher earnings
over the period, favourable movements in equity markets, rising yield curves, and the impact of valuation basis changes. Momentum
Metropolitan Holdings had a group SCR cover of 1.6 times SCR at 30 June 2022, an improvement from 1.5 times SCR at 30 June 2021.
The Group declared a final dividend of 65 cents per ordinary share, resulting in a total dividend for F2022 of 100 cents per ordinary
share. This represents an increase of 150% on the prior year. After having received regulatory approval, the Group commenced a share
repurchase programme of ordinary shares in August 2022. The current approval is for repurchases of up to R750 million. As of
12 September 2022, the Group had repurchased 23 million shares at a cost of R382 million.
Return on equity (ROE) for the year was 22.7%, up from 4.9% in the prior year. This increase follows the Group’s earnings improvement
together with an ongoing focus on capital efficiency. Group embedded value per share was R29.77 on 30 June 2022. The return on
embedded value per share was 11.7% in F2022, up from 6.3% in the prior year.
VALUE CREATION THROUGH CAPITAL MANAGEMENT
The Group is focused on embedding its revised capital management framework, announced at the Investor Conference in May 2021, including
the active management of the discretionary and surplus capital that remains. The revised capital management framework made it clear that
surplus capital would be distributed through dividends, special dividends or share repurchases.
Share repurchase programme
Momentum Metropolitan continually assesses its surplus capital position, taking into consideration expected dividends and other planned
capital deployments across the corporate portfolio. Based on the assessment of the Group’s capital position, the Board approved in late
F2022 a repurchase programme of the Group’s ordinary shares up to an amount of R750 million. The programme is in accordance with the
general authority received by way of a shareholder resolution passed at the Annual General Meeting, held on 25 November 2021.
Following approval from the Prudential Authority, Momentum Metropolitan commenced with the programme on 10 August 2022. The Group
remains committed to following a disciplined trading approach under the programme and will only repurchase shares to the extent that
market conditions are favourable. Repurchased shares will be cancelled. Between 10 August 2022 and 12 September 2022, the Group had
bought back 23 million shares, for a total consideration of R382 million. When these shares are cancelled, the gain on embedded value will
be approximately 20 cents per share.
In line with Momentum Metropolitan’s capital distribution philosophy, the share repurchase programme will not be in lieu of a dividend and
the Group’s dividend policy to declare dividends within a dividend cover range of 2.0 to 3.0 times normalised headline earnings, remains
unchanged.
MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 3
The Board believes that the repurchase programme demonstrates our dynamic approach to capital management in line with the Group’s
Reinvent and Grow strategy. Subject to the capital and liquidity requirements of the Group, and provided ordinary shares can be bought
back at an attractive discount to embedded value per share, it is anticipated that the share repurchase programme of R750 million would
be increased over the next two years.
Dividends
Momentum Metropolitan declared a final dividend of 65 cents per ordinary share. Together with the interim dividend of 35 cents per
ordinary share, the total dividend for the 12 months ended 30 June 2022 is 100 cents per ordinary share, an increase of 150% from the
40 cents per ordinary share declared in the prior year. The F2022 total dividend represents a dividend cover of 2.9 times normalised
headline earnings. This payout is at the upper end of the target dividend cover range of 2.0 to 3.0 times normalised headline earnings.
Capital deployment
Momentum Metropolitan allocates capital to support value creation within the businesses. This is underpinned by the appropriate return
on capital targets linked to the Group hurdle rate framework and its strategic objectives.
The following strategic investments and disposals were made during the period:
Areas of capital deployment R million
Momentum Investments 237
Momentum Corporate 13
Momentum Metropolitan Health 17
Momentum Metropolitan Africa 22
New Initiatives 642
Shareholders segment 132
Total capital deployment 1 063
Business disposals
Momentum Investments (176)
New Initiatives (327)
Total business disposals (503)
Total net capital deployment* 560
* Total net capital deployment is the result of total capital deployment less total business disposals
Capital deployed to Momentum Investments was mainly to support an upgrade in Momentum Wealth’s investment platform and a deferred
payment made on a recent asset management acquisition in the UK. Within New Initiatives, R583 million was deployed to Aditya Birla Health
Insurance (ABHI) (our health insurance joint venture in India). The deployment of R132 million in the Shareholders segment relates to the
renovation of the Group’s various owner-occupied properties in order to be better suited to flexible working arrangements, such as hot-desks.
Momentum Investments disposed of its stake in Aluwani Capital Partners and under New Initiatives, the Group disposed of its interest in
the aYo business.
Proposed transactions
In August 2022, Aditya Birla Capital Limited and Momentum Metropolitan jointly announced a transaction whereby an affiliate of the
Abu Dhabi Investment Authority (ADIA) proposes to acquire a shareholding of 9.99% in ABHI. Aditya Birla Capital Limited and Momentum
Metropolitan will dilute their respective interest to 45.91% and 44.1%. The capital infusion of R1.3 billion (Rs. 665 crore) will be used to fund
ABHI’s growth in the health insurance market in India.
Rand Merchant Investment Holdings Limited (RMI) is currently in advanced stage discussions with its co‑shareholders, Momentum Metropolitan
and Royal Bafokeng Investment Holding Company Proprietary Limited (RBIH), about Momentum Metropolitan’s interest to acquire RMI’s interest
in RMI Investment Managers (excluding RMI Investment Managers Affiliates 1 (Pty) Limited, which will be retained within RMI’s structures).
This proposed transaction would solidify the existing empowerment, distribution and financial ambitions of RMI Investment Managers whilst
retaining the independence and unique boutique characteristics of the affiliate model. RBIH has given its in principle support to the proposed
transaction and remains a committed and aligned partner. This proposed transaction is subject to requisite governance and regulatory
approvals, agreement of the final terms, confirmation of the structure, and other conditions typical of a transaction of this nature.
Subordinated debt
On 25 May 2022, Momentum Metropolitan Life Limited successfully auctioned two unsecured subordinated debt instruments, valued
at R1 000 million in total. We are pleased that the issuance was nearly two times oversubscribed, evidence of liquidity in the market, and
debt investors’ positive view of Momentum Metropolitan’s subordinated debt. The R1 000 million raised will be used to redeem an existing
R980 million instrument, maturing on 12 August 2022.
4 | MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022
CONSOLIDATED GROUP FINANCIAL PERFORMANCE
Group financial performance
The following table outlines the contribution from operating profit and investment return to normalised headline earnings per business unit:
F2022 F2021 Δ%
Normalised Normalised Normalised
Operating Investment headline Operating Investment headline Operating Investment headline
R million profit return earnings profit return earnings profit return earnings
Momentum Life 976 134 1 110 (991) 132 (859) >100% 2% >100%
Momentum Investments 870 68 938 1 103 (8) 1 095 (21)% >100% (14)%
Metropolitan Life 606 66 672 367 68 435 65% (3)% 54%
Momentum Corporate 1 049 125 1 174 (607) 55 (552) >100% >100% >100%
Momentum Metropolitan
Health 212 (3) 209 214 (1) 213 (1)% <(100)% (2)%
Non-life Insurance 399 62 461 508 36 544 (21)% 72% (15)%
Momentum Metropolitan
Africa 8 110 118 62 194 256 (87)% (43)% (54)%
Normalised headline
earnings from operating
business units 4 120 562 4 682 656 476 1 132 >100% 18% >100%
New Initiatives (468) 2 (466) (360) 2 (358) (30)% 0% (30)%
Shareholders segment (289) 456 167 (223) 456 233 (29)% 0% (28)%
Normalised headline
earnings 3 363 1 020 4 383 73 934 1 007 >100% 9% >100%
Operating profit
Operating profit increased significantly to R3 363 million from R73 million in the prior year. This is mainly attributable to the less severe
impact of Covid-19 on earnings in F2022. During the first half of the year, Momentum Life and Momentum Metropolitan Africa still
experienced significant net mortality losses due to the third Covid-19 wave. Mortality experience improved over the second half of the year,
resulting in the mortality profit of R105 million for the full year after allowing for movements in Covid-19 provisions. This compares to net
mortality losses of R2 823 million in the prior year.
Operating profit was further aided by an improvement of R163 million in investment variances. Momentum Life was particularly affected
by this and saw a turnaround in investment variances from a negative variance of R517 million in the prior year to a positive variance of
R53 million in F2022. This was partly offset by a decline in investment variances in all other business units, mainly from the impact of
changes in the yield curves on annuities and structured products.
Momentum Corporate benefited materially from much improved underwriting results on both group life and disability products. Operating
profit in Non-life Insurance was supported by good underlying operational growth in Guardrisk offset by the negative impact from weather-
related claims and increased claims inflation in Momentum Insure.
Investment return
Investment return improved by 9% to R1 020 million, boosted by the continued recovery in investment markets. In the Shareholders
segment, investment return increased due to fair value gains from the revaluation of the Group’s investment in venture capital funds and
foreign exchange gains on the Group’s foreign assets.
IMPACT OF THE COVID-19 PANDEMIC ON THE GROUP
The earnings impact from Covid-19 on the Group during F2022 was significantly less than the preceding two years.
Mortality experience
The mortality experience during the second half of F2022, affected by the fourth and fifth Covid-19 waves in South Africa, was significantly
less severe than during the first half of F2022 when the third Covid-19 wave still caused significant mortality losses. During F2022, our
South African life insurance businesses paid R10.8 billion in gross mortality claims, of which R4.6 billion was paid in the first quarter.
Releases of the mortality component of Covid-19 provision in F2022 amounted to R1 639 million, of which R1 133 million was released in
the first half of the year. After the release of the Covid-19 provisions, the Group recorded a R105 million mortality profit for F2022.
MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 5
The table below shows the contribution from each of the Group’s business units to the net mortality result for the 12-month period:
Momentum
Momentum Momentum Metropolitan Momentum Metropolitan
R million Life Investments Life Corporate Africa Total
Mortality experience (983) (23) (148) (389) (190) (1 733)
Annuity experience – 169 84 36 17 306
Change in annuity reserves – (20) – – – (20)
Covid-19 additional provision (64) – – – (23) (87)
Covid-19 provision release 689 – 283 610 57 1 639
Net mortality losses (358) 126 219 257 (139) 105
Impact of provision release on normalised headline earnings
The change in existing Covid-19 provisions over the 12 months ended 30 June 2022 is shown in the table below:
Non-life
insurance
R million Mortality Morbidity claims Terminations Total
Provision at 30 June 2021 1 854 71 54 50 2 029
Release of provisions (1 619) (62) (36) (26) (1 743)
Additional provisions 87 – – – 87
Provision at 30 June 2022 322 9 18 24 373
The total provisions available at the start of F2022 amounted to R2 029 million (net of deferred tax). Covid-19 provision releases during the
year amounted to R1 743, of which R1 619 million related to mortality. As at 30 June 2022 the sufficiency of the remaining provisions were
assessed. The recent fifth Covid-19 wave did not result in as large an increase in mortality claims as seen in earlier waves – especially if
we allow for seasonal mortality that is typically higher over the winter months.
Despite the improvement in mortality experience, claims remain above pre-pandemic levels. To withstand the impact of assumed sixth
and seventh waves of Covid-19, consistent with the fourth and fifth waves, additional Covid-19 provisions of R87 million were raised by
Momentum Life and Momentum Metropolitan Africa, while the remaining provisions in Metropolitan Life and Momentum Corporate were
deemed sufficient against future Covid-19 claims. This brings the closing Covid-19 provision to R373 million as at 30 June 2022.
Business interruption insurance
By 30 June 2022, Guardrisk had settled most of its business interruption claims, with only 64 claims with an estimated gross value of
R110 million outstanding. Up to 30 June 2022, Momentum Insure had three business interruption claims with an estimated gross value
of R18 million outstanding.
The remaining provision against business interruption claims is seen as sufficient to absorb the impact of the outstanding claims in
Guardrisk and Momentum Insure.
INVESTMENT VARIANCE
Investment variances are included in operating profit and are shown below net of tax. The table below sets out the investment variance
by business and reflects the various offsetting impacts experienced over the period.
R million 1QF2022 2QF2022 3QF2022 4QF2022 F2022 F2021 Δ%
Momentum Life 40 (240) (7) 260 53 (517) >100%
Momentum Investments 10 9 16 (1) 34 327 (90)%
Metropolitan Life (57) (2) 35 67 43 66 (35)%
Momentum Corporate (21) 56 57 56 148 206 (28)%
Momentum Metropolitan Africa (11) 59 5 (53) – 78 (100)%
Shareholders segment 16 24 8 27 75 31 >100%
Total investment variance (23) (94) 138 374 353 190 85%
Investment variances, particularly on long-term protection business, as well as annuity business, have been subject to significant volatility
over the last two years, driven by large changes in the shape and level of the nominal and real yield curves (and by implication changes in the
market implied inflation).
Over the 12 months to 30 June 2022, the nominal government bond yield curve increased at all durations. The real government bond
yield curve, however, reduced. The expense inflation curve, which is the difference between the nominal and real market implied curves,
increased, which resulted in an elevation in market implied inflation, particularly at longer durations. Both the nominal and the real yield
curves flattened over the same period.
6 | MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022
In total, the Group recorded positive investment variances of R353 million in F2022, compared to positive R190 million in the prior year. The
F2022 positive variance was made up of negative variance in the first six months, followed by positive variance in the second half of the financial
year. Investment variances thus explain much of the significant improvement in NHE in the second half of the year versus the first six months.
The volatility in the investment variances was most pronounced in Momentum Life, where the Myriad protection product is particularly
sensitive to yield curve changes at long durations. The nominal yield curve increased at all durations during the final quarter, which led to a
reversal of the substantial negative investment variances reported in the first half of F2022.
The decline in investment variances for Momentum Investments and Momentum Corporate followed lower earnings from mainly annuity
business, caused by movements in both the real and nominal yield curves. The R23 million decline in Metropolitan Life’s investment variance
was largely due to an increase in market implied inflation. In Momentum Metropolitan Africa, investment variance declined R78 million, driven
by the current year recovery in the equity markets being smaller than that in the prior year, particularly in Namibia and Botswana.
CONSOLIDATED GROUP NEW BUSINESS PERFORMANCE
R million F2022 F2021 Δ%
Recurring premiums (R million) 4 607 3 783 22%
Single premiums (R million) 51 885 47 497 9%
PVNBP (R million) 72 673 65 898 10%
VNB (R million) 626 725 (14)%
New business margin 0.9% 1.1%
The table below shows the PVNBP by business unit for each quarter of F2022:
R million 1QF2022 2QF2022 3QF2022 4QF2022 F2022 F2021 Δ%
Momentum Life 1 736 1 759 1 833 1 963 7 291 7 479 (3)%
Momentum Investments 11 059 11 891 10 340 9 186 42 476 41 471 2%
Metropolitan Life 1 730 1 826 1 708 1 896 7 160 5 885 22%
Momentum Corporate 1 520 3 391 2 851 4 514 12 276 8 220 49%
Momentum Metropolitan Africa 1 202 881 786 604 3 470 2 843 22%
Total PVNBP 17 247 19 748 17 518 18 160 72 673 65 898 10%
The Group increased PVNBP to R72.7 billion, 10% higher than the prior year. Momentum Corporate delivered pleasing new business
growth in both recurring premium group risk products, as well as single premium investment PVNBP, which almost doubled. Metropolitan
Life achieved strong growth in protection new business, as well as annuities and structured single premiums. Momentum Metropolitan
Africa also saw pleasing new business volume growth, driven by corporate new business in Namibia, Lesotho and Botswana, together
with strong retail savings and annuity new business in Namibia and Botswana. Momentum Investments delivered solid growth in
guaranteed annuities and Momentum Wealth’s local investment platform business while Momentum Life’s new business declined
mainly due to a decline in PVNBP on protection products, partly offset by improved new business on long-term savings business.
The table below shows the VNB by business unit for each quarter of F2022:
R million 1QF2022 2QF2022 3QF2022 4QF2022 F2022 F2021 Δ%
Momentum Life – 5 (28) 3 (20) 72 <(100)%
Momentum Investments 91 141 54 60 346 392 (12)%
Metropolitan Life 79 73 4 88 244 253 (4)%
Momentum Corporate (12) 18 (4) 66 68 11 >100%
Momentum Metropolitan Africa (1) 6 (3) (14) (12) (3) <(100)%
Total VNB 157 243 23 203 626 725 (14)%
The Group’s VNB declined by 14% to R626 million, driven by the negative impact of yield-curve related economic assumption changes,
which are effected at the point of sale in all business units, and a general change in new business mix to lower margin products.
VNB was lower than the prior year across all the business units, except Momentum Corporate, which delivered a strong contribution
of R68 million due to higher sales volumes and contained expenses. Momentum Life’s VNB of negative R20 million resulted from lower
new business volumes on protection products and the change in new business mix from protection business towards lower margin
long-term savings business. A negative R12 million VNB contribution from Momentum Metropolitan Africa was caused by a negative
VNB in Namibia. VNB for Momentum Investments declined to R346 million, mainly due to a change in new business mix from higher
margin offshore investments in Momentum Wealth, lower assumed credit spreads in the second half of F2022 and an increase in renewal
expenses. Metropolitan Life’s VNB of R244 million delivered a strong result in the fourth quarter, and largely recovered from the 18%
decline reported for the first nine months of F2022. That decline was caused by the adverse impact of policies that lapsed before the first
premium was paid, leading to irrecoverable distribution expenses. The new business margin declined to 0.9%, from 1.1% in the prior period.
MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 7
EMBEDDED VALUE
Embedded value earnings (R million) F2022 F2021 Δ%
Embedded value at the start of the period 41 328 38 524
Change in embedded value before capital flows 4 787 2 819 70%
Embedded value earnings from operations (covered business) 3 826 (545) >100%
Embedded value earnings attributable to investment markets (152) 1 698 <(100)%
Embedded value profit from non-covered businesses 1 113 1 666 (33)%
Capital flows (687) (15) <(100)%
Embedded value at the end of the period 45 428 41 328 10%
Return on embedded value (ROEV) 11.6% 7.3%
ROEV on covered business 12.3% 3.8%
ROEV on non-covered business 9.7% 20.8%
ROEV per share 11.7% 6.3%
The Group’s embedded value results for the year ended 30 June 2022, reflect a return more closely aligned with our long-term
expectations, compared to the results observed over the last two years.
In the covered business, the release of Covid-19 provisions into embedded value earnings accounted for the largest change from the
prior year’s embedded value earnings (prior year included a large negative impact and this year’s release included a large positive impact). A
methodology change, where profits not previously valued on ancillary protection benefits in Momentum Life, made a positive contribution
when analysing this year’s embedded value earnings. Experience variances reflected the benefits of a diversified portfolio in the covered
operations, where both mortality and morbidity as well termination experience results varied by lines of business, but were muted in
aggregate.
In the non-covered business, a lower growth trajectory than anticipated resulted in a significant write-down of the valuation of Momentum
Insure in the first half of F2022. Despite this, non-covered operations contributed positively to embedded value earnings, with positive
contributions across a range of business units. The largest contribution was from Guardrisk where earnings growth is progressing as
planned. Fair value gains on the Group’s venture capital investments also made a noteworthy positive contribution.
SEGMENTAL PERFORMANCE
Momentum Life
R million F2022 F2021 Δ%
Operating profit 976 (991) >100%
Investment return 134 132 2%
Normalised headline earnings 1 110 (859) >100%
Recurring premium new business 1 053 1 059 (1)%
Single premium new business 2 202 2 090 5%
PVNBP 7 291 7 479 (3)%
VNB (20) 72 <(100)%
New business margin (0.3)% 1.0%
Normalised headline earnings
Momentum Life recorded a strong normalised headline earnings of R1 110 million in F2022, compared to a loss of R859 million in the prior
year. Operating profit of R976 million recovered from an operating loss of R991 million in the prior year. The key contributors include year-
on-year improvements of R730 million in net mortality losses, R570 million in investment variances mainly driven by yield curve changes,
and a net impact of R577 million from operating assumption and modelling changes.
Net mortality losses improved from R1 088 million in the prior year to R358 million in F2022. The current year includes negative mortality
experience variances of R983 million, partly offset by the net movement in Covid-19 provisions of R625 million. The mortality claims
experience during the fourth and fifth waves that occurred in the second half of F2022, had a significantly lower impact on earnings.
Although still higher than pre-pandemic experience, mortality experience in F2022 improved compared to the prior year.
During June 2022, the nominal yield curve increased at all durations, benefitting the protection business in particular. Momentum Life’s
total investment variance improved from a loss of R517 million in the prior year to a profit of R53 million in F2022. It must be noted that
investment variances are volatile by nature.
The change in operating assumption and modelling changes include positive expense assumption changes and modelling refinements
in which prospective valuation models were adopted for some benefits. This was partly offset by the strengthening of persistency
assumptions in the protection and traditional products.
8 | MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022
New business
Momentum Life’s PVNBP declined by 3% year-on-year to R7.3 billion, mainly attributable to a 10% decline in new business on protection
business, offset by the 4% improvement in new business on long-term savings business.
VNB declined from a profit of R72 million to a loss of R20 million. The long-term savings products contributed positively to VNB but was
offset by the negative impact from lower protection new business. Unfavourable yield curve movements, effected at the point of sale in
economic assumption changes, further exacerbated the negative impact on VNB. This translated to a new business margin of -0.3%.
Momentum Investments
R million F2022 F2021 Δ%
Operating profit 870 1 103 (21)%
Investment return 68 (8) >100%
Normalised headline earnings 938 1 095 (14)%
Recurring premium new business 205 207 (1)%
Single premium new business 41 649 40 666 2%
PVNBP 42 476 41 471 2%
VNB 346 392 (12)%
New business margin 0.8% 0.9%
Normalised headline earnings
Normalised headline earnings from Momentum Investments declined by 14% to R938 million. This includes a 21% decline in operating
profit to R870 million, offset to some extent by strong growth in investment return resulting mainly from fair value and currency gains
on offshore assets.
The decline in operating profit was mainly attributable to implementation expenses of more than R100 million for replacing Momentum
Wealth’s legacy investment platform, and a R293 million deterioration in investment variances related to yield-curve movements in the
annuities and structured business. This was partly offset by the positive impact in Momentum Wealth as well as the investment management
businesses in South Africa and the UK from continued good new business and favourable local and offshore market impacts. The inclusion of
the results of Seneca Investment Managers for a full 12 months (compared to seven months in the prior year) also contributed positively.
New business
PVNBP for Momentum Investments improved 2% to R42.5 billion, driven by good growth on guaranteed annuities and on the local
Momentum Wealth investment platform. This was slightly offset by lower new business on the offshore Momentum Wealth investment
platform, which remained strong in absolute terms.
The VNB declined by 12% to R346 million, mainly attributable to a change in new business mix from higher margin offshore investments
in Momentum Wealth, lower assumed credit spreads in the second half of F2022, an increase in renewal expenses and a change in the
capital allocation methodology. The new business margin reduced slightly to 0.8%.
Assets under management and administration
Assets under management on the Momentum Wealth investment platform increased by 4% to R205 billion, mainly attributable to new
business inflows partly offset by outflows and flat year-on-year market movements. On non-covered Investment Management business,
assets under management increased by 5% due to the recovery of investment markets and good inflows on retail assets. The acquisition
of Seneca Investment Managers in the UK also contributed R12.6 billion to the growth in institutional assets under management.
R million F2022 F20214 Δ%
On-balance sheet Momentum Wealth 135 129 5%
Off-balance sheet Momentum Wealth 72 69 4%
Non-covered business (Investment Management) 502 477 5%
Assets under management and administration 709 675 5%
4
On-balance sheet Momentum Wealth restated due to R11 billion on-balance sheet assets that were better suited to be disclosed as Momentum Wealth linked
assets rather than managed internally or by other managers within the Group. R7 billion in on-balance sheet assets were incorrectly calculated in Momentum
Wealth linked assets.
MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 9
Metropolitan Life
R million F2022 F2021 Δ%
Operating profit 606 367 65%
Investment return 66 68 (3)%
Normalised headline earnings 672 435 54%
Recurring premium new business 1 710 1 409 21%
Single premium new business 1 845 1 483 24%
PVNBP 7 160 5 885 22%
VNB 244 253 (4)%
New business margin 3.4% 4.3%
Normalised headline earnings
Metropolitan Life’s normalised headline earnings improved by 54% to R672 million. Operating profit growth of 65% to R606 million was
mainly attributed to a net mortality profit of R219 million, which improved from a net mortality loss of R468 million in the prior year. The
current year’s operating profit includes a positive net movement in opening Covid-19 provisions of R283 million, partly offset by negative
mortality and longevity experience variance of R64 million. This compares to a net mortality loss of R467 million for the prior year.
Operating profit growth was partly offset by negative persistency variance of R200 million, which was primarily due to the correction
of operational and system issues related to the migration of the administration system. The system issues were noted in the first half
of the financial year, but the rectification continued to negatively impact the results during the second half of F2022. Some persistency
experience deterioration in funeral products was also noted and as a result the persistency assumptions were strengthened. The
persistency experience deterioration in the life cover business will be addressed by management actions.
Investment variances remained positive but deteriorated by R23 million year-on-year, due to an increase in implied inflation caused by
an increase in the nominal yield while the real yield reduced.
New business
Metropolitan Life’s PVNBP increased by 22% to R7.2 billion compared to the prior year. This includes continued improvement in protection
new business and annuities and structured single premiums, which delivered pleasing year-on-year growth of 19% and 41% respectively.
The average adviser productivity has remained strong throughout the year.
VNB declined 4% to R244 million. This represents a strong recovery from the decline of 18% that was reported for the first nine months of
F2022. The decline can be attributed to a change in product mix towards lower margin savings products and the adverse impact on VNB
when policies lapsed before the first premium was paid, part of which related to fraudulent activities by (now dismissed) advisers, which
resulted in distribution expenses that cannot be recovered. Consequently, the new business margin declined from 4.3% to 3.4%.
Momentum Corporate
R million F2022 F2021 Δ%
Operating profit/(loss) 1 049 (607) >100%
Investment return 125 55 >100%
Total normalised headline earnings 1 174 (552) >100%
Recurring premium new business 1 239 694 79%
Single premium new business 4 550 2 314 97%
PVNBP 12 276 8 220 49%
VNB 68 11 >100%
New business margin 0.6% 0.1%
Normalised headline earnings
Momentum Corporate’s normalised headline earnings improved from a loss of R552 million to a profit of R1 174 million. The strong
turnaround from an operating loss of R607 million in the prior year to an operating profit of R1 049 million in F2022 follows the turnaround
of a net mortality loss of R1 344 million in the prior year into a net mortality profit of R257 million in F2022. This profit includes the
partial release of R610 million of the opening Covid-19 reserves, offset by net negative mortality and longevity experience variance of
R353 million.
The improvement in operating profit was further bolstered by strong income disability results aided by the re-pricing programme that has
taken place over the last three years, favourable mortality experience variance on income disability claims in payment and better than
expected return-to-work experience.
Investment variance of R148 million, although positive, declined from R207 million in the prior year mainly due to a lower earnings impact
on annuities and investment guarantee reserves caused by movements in the real and nominal yield curves.
10 | MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022
New business
Momentum Corporate’s PVNBP of R12.3 billion increased by 49% compared to the prior year, boosted by strong growth in recurring and
single premium flows. Recurring premium new business increased by 79%, mainly on group risk products, including the onboarding of
three large clients. New business from single premiums increased by 97%, driven by improved investment flows into FundsAtWork and
from large corporate investment and annuity sales.
VNB improved to R68 million from R11 million in the prior year, bolstered by higher PVNBP and contained expenses. The strong growth
in VNB was dampened by the new business mix that was more weighted toward lower margin products. The new business margin was
0.6% for the year.
Momentum Metropolitan Health
R million F2022 F2021 Δ%
Operating profit 212 214 (1)%
Investment return (3) (1) <(100)%
Normalised headline earnings 209 213 (2)%
Minorities 102 85 20%
Normalised headline earnings gross of minorities 311 298 4%
Normalised headline earnings
Momentum Metropolitan Health’s normalised headline earnings declined by 2% against the prior year to R209 million. Before the
deduction of the share of minorities, normalised headline earnings increased by 4%. The increase in the share of minorities resulted from
the B-BBEE transaction with strategic partners in December 2021. The growth in the gross normalised headline earnings was driven by fee
income generated from membership growth in Health4Me (the low cost health insurance product) and public sector membership, good
Health4Me claims experience and prudent expense management.
Membership
Good membership growth of 3%, amidst a tough economic environment, was mainly attributable to the continued growth of the public
sector, Health4Me and Momentum Medical Scheme membership. Membership growth remained subdued in the corporate market
segment, reflective of economic conditions placing pressure on employment numbers.
Non-life Insurance
R million F2022 F2021 Δ%
Guardrisk 449 377 19%
Momentum Insure 12 167 (93)%
Normalised headline earnings 461 544 (15)%
Operating profit 399 508 (21)%
Investment return 62 36 72%
Normalised headline earnings
The normalised headline earnings for Non-life Insurance declined by 15% to R461 million. Operating profit declined by 21% against the
prior year, mainly attributable to lower underwriting profits in Momentum Insure, which were negatively impacted by a higher claims
experience, but was partly offset by favourable earnings growth in Guardrisk. Investment return increased by 72% to R62 million and
benefited from improved market returns and a one-off recognition of the value of a cell acquired by Guardrisk.
During April 2022 and then again in May 2022, days of heavy rainfall in KwaZulu-Natal resulted in severe flooding and landslides. The Non-
Life Insurance business has assessed the impact of floods, taking into account reinsurance cover in place, and as at 30 June 2022, a net
loss (after tax and reinsurance) of R53 million was reported.
Guardrisk
Guardrisk’s normalised headline earnings increased 19% to R449 million. Operating profit was aided by strong growth of 30% in
underwriting profits of Guardrisk General Insurance (GGI) and pleasing growth in management fee income in the mining rehabilitation and
life divisions. Investment return benefited from the recognition of the value of a cell that was taken over at a discount to its net asset value,
resulting in a net increase in normalised headline earnings of R40 million, after concluding all phases of the transaction.
MOMENTUM METROPOLITAN HOLDINGS FINANCIAL RESULTS 2022 | 11
Guardrisk’s industry and product diversification across the cells continues to offset the negative impact that Covid-19 had in some of its
activities.
R million F2022 F20216 Δ%
Gross written premium 2 813 2 327 21%
Net earned premium 1 729 1 521 14%
Claims incurred (890) (770) 16%
Acquisition cost (472) (468) 1%
GGI underwriting profit5 367 283 30%
5
The underwriting profit in this table is the total for GGI, a division of Guardrisk Insurance Company Limited.
6
The prior year numbers have been restated to exclude the impact of 100% reinsurance transactions to align to current year reporting.
Momentum Insure
Normalised headline earnings in Momentum Insure declined from R167 million to R12 million, mainly impacted by a high claims
experience following prolonged wet weather over the summer months, a large commercial fire claim, the KwaZulu-Natal floods and
increased inflationary pressures on the back of supply-chain challenges and increases in the oil price.
New business premiums increased by 12% to R628 million amidst a very challenging operating environment. The last quarter of the
financial year showed very pleasing performance compared to each of the quarters in the current and prior year. The highest quarterly
sales were achieved since the acquisition of Alexander Forbes Insurance and was a pleasing result after subdued sales were experienced
in the months immediately after the implementation of a single line of business system in July 2021. Persistency experience remained
good and well within appetite.
R million F2022 F2021 Δ%
Gross written premium 2 879 2 793 3%
Net earned premium (R million) 2 739 1 479 85%
Claims ratio 70.0% 62.6%
MOMENTUM METROPOLITAN AFRICA
R million F2022 F2021 Δ%
Namibia 89 125 (29)%
Botswana (11) 49 <(100)%
Lesotho 187 172 9%
Ghana 43 68 (37)%
Other countries (51) 9 <(100)%
Centre costs (139) (167) 17%
Normalised headline earnings 118 256 (54)%
Operating (loss)/profit 8 62 (87)%
Investment return 110 194 (43)%
Recurring premium new business 400 ...
