DURBAN - MOMENTUM Metropolitan Holdings yesterday warned its shareholders that it expected its half-year earnings to decline as much as 50 percent, hurt by severe Covid-19 related claims bigger than it initially anticipated.
The group said it expected its headline earnings per share (Heps) for six months to end December to decline by between 30 and 50 percent, to be between 51 cents a share and 71c, down from last year’s Heps of 101c.
Its earnings per share was also forecast to decline by between 30 and 50 percent, to be between 52c and 73c, down from 104c reported a year earlier.
In its full-year results for the year to end June published in September, Momentum said it raised additional provisions against the impact of the Covid-19 pandemic and the resultant deterioration in economic conditions.
“The experience to date, since September 2020, has unfortunately been more severe than what was initially modelled. Covid-19 related claims were especially severe in January 2021,” the group said.
The expected decline in earnings comes after the country’s largest insurance financial services group reported an 18 percent growth in normalised headline earnings to R1.04 billion during the quarter to the end of September, with operating profit up by 61 percent to R846 million and value of new business increasing by 6 percent to R106m.
However, Momentum has updated its modelling to take account of the most recent internal claims data.
“As a result, the group has decided to increase its Covid-19 reserves by approximately R850m,” the group said. In the year to end June, Momentum reported a 51 percent decline in earnings, hurt by a R251m loss on additional provisions that were made, and a net negative impact of R983m for potentially adverse claims and policyholder lapses and withdrawals related to the Covid-19 pandemic.
The fall in earnings at year-end put the group’s “reset and grow” strategy under threat and potentially missing out on its 2021 targets of achieving between R3.6bn and R4bn in normalised headline earnings.
Momentum has lamented the impact of Covid-19 on its operations and said, excluding these additional provisions, it would have delivered earnings that were similar to those reported last year, with earnings supported by solid growth in the operating profit of Momentum Investments, Non-life Insurance and Momentum Metropolitan Africa. The group expects to release its half-year results on March 4. Momentum Metropolitan shares closed 3.10 percent lower at R16.90 on the JSE yesterday.
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