Insurance and financial services company Old Mutual raises provisions over excess Covid-19 claims
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AS SOUTH Africa braces for the fourth wave of Covid-19 infections, insurer and financial services firm Old Mutual is the latest insurer to raise the flag of worse mortality claims than anticipated, saying it has once again been forced to raise its provisions at the end of June 2021, amid vaccination hesitancy.
Yesterday, Momentum Metropolitan also said it has seen significantly higher mortality claims, while last week Liberty Holdings flagged that its Covid-19 pandemic reserve was being reassessed due to the 2020 and 2021 reserve being depleted from high mortality claims.
Old Mutual, which completed the unbundling of a 12 percent stake in Nedbank earlier this month, said yesterday that the worse than expected mortality claims had resulted in the excess deaths impacting on profit of R6.6 billion for the year to date. Alarmingly the group said it only had R1bn of the pandemic provision left for expected excess mortality claims related to Covid-19, after releasing R4.9bn of the pandemic provision in order to partially offset the excess deaths. “The rate of vaccine hesitancy observed in South Africa has, however, been higher than anticipated at the half-year, resulting in higher levels of claims,” said the group.
South Africa’s inoculation rate is far
below the desired level aimed at providing herd immunity, as people delay the acceptance of vaccines despite the availability of vaccination services.
Old Mutual said it would continue to closely monitor its mortality claims experience as future waves and their impacts remained uncertain. “The adequacy of the provision will be assessed at December 31, 2021,” it said.
This is not the first time Old Mutual has raised its Covid-19 provisions. In September it announced increased provisions by R2bn at the end of June 2021, to take into account the emerging expectations of waves 3 and 4, as well as potential future waves.
Meanwhile, Momentum Metropolitan
group said yesterday the Momentum Life and Momentum Metropolitan Africa businesses had experienced significantly higher than expected claims in the quarter ended September 2021.
The group’s South African life insurance businesses paid R4.6bn in mortality claims during the quarter ended September, compared with the R5.6bn full year average of mortality claims before the pandemic. “In Momentum Life, the total claim amount was double the comparative period, which was already elevated during the first wave of the pandemic to more than double the pre-pandemic average,” said the group.
The number of death claims in Botswana and Namibia over the quarter were more than double the 12-month average for financial year 2021. Momentum Metropolitan also increased its provision against Covid-19-related experience at the end of June 2021.
It said the total provisions available at the start of this quarter amounted to R2.029bn net of tax. During this quarter, the provision was reduced by R1.013bn, leaving R1.016bn to be released, the majority of which is expected to be released over the course of the 2022 financial year. However, the Association for Savings and Investment South Africa (Asisa) yesterday said the South African life insurance industry remained resilient and well capitalised to handle the claims.
Anna Rosenberg, a senior policy
advisor at Asisa, said the association and its members were deeply concerned about the lives lost due to the Covid-19 pandemic. Rosenberg said at the end of June 2021, Asisa members held free assets of R334.6bn, which was almost double the reserve buffer required by the Solvency Capital Requirements. Over and above this, many life insurers made an additional provision for Covid-19 reserves.
“We are, therefore, confident that despite the higher than usual death claims recorded by most life insurers since the start of the pandemic, the South African life insurance industry remains resilient and well capitalised to honour the long-term contractual promises made to customers,” said Rosenberg.
BUSINESS REPORT ONLINE