Momentum reports 58% decline in headline earnings, withholds final dividend

Momentum Metropolitan has reported a significant decline in its full-year normalized headline earnings per share, which fell by half to 101.5 cents. The insurance group attributed this decline to a drop in new business volume and increased provisions against COVID-19 related claims. In a move reflective of the current economic climate, Momentum has decided to withhold its final dividend. The company's CEO, Hillie Meyer, discussed these challenges and future outlook in a recent interview with CNBC Africa. During the interview, Meyer highlighted the impact of both past and anticipated trends on the company's results. He mentioned that the negative items in the results reflect not only the last 12 months but also the next 12 months. While there hasn't been a reduction in existing business so far, Meyer explained that provisions were made in anticipation of potential terminations due to reduced disposable income resulting from the pandemic's economic impact. Meyer confirmed that the company has seen an increase in claims, particularly in the funeral and corporate business segments. With over 500 claims in metropolitan and a total claim amount of approximately 50 million in the momentum life segment, the company is closely monitoring the situation. Meyer emphasized that the full impact of these claims will likely materialize in the future. When asked about the trends in COVID-19 cases, Meyer expressed cautious optimism. He mentioned that claims, especially in metropolitan, have started to decline in recent weeks, suggesting a possible peak. However, he cautioned that the situation remains fluid and contingent on various factors, such as adherence to safety protocols and the possibility of a new wave of infections. Regarding the dividend outlook, Meyer stated that if the company achieves positive normalized headline earnings in the next six months, they will consider reinstating dividends. This decision reflects the company's commitment to maintaining financial stability and preserving cash reserves during uncertain times. In conclusion, Momentum Metropolitan's financial results underscore the challenges faced by the insurance industry amidst the ongoing pandemic. The company's strategic decision to withhold dividends demonstrates a prudent approach to financial management in a volatile economic environment. Despite the current uncertainties, Meyer remains cautiously optimistic about the future, highlighting positive signs in claim trends and emphasizing the company's commitment to delivering value to shareholders.