Momentum sees 44% drop in headline earnings as pandemic weighs

Momentum, a leading insurer, has reported a significant 44 per cent drop in headline earnings per share year-on-year for the first half of its 2021 financial year. This decline in earnings has been attributed to the adverse effects of the Covid-19 pandemic, particularly the impact of the second wave in South Africa. The company's CEO, Hillie Meyer, joined CNBC Africa to discuss the financial implications of the pandemic on their business. During the interview, Meyer highlighted the stark disconnect between the official Covid-19 related deaths reported in South Africa, which stood at around 50,000, and the actual impact on the ground. He raised concerns about the number of excess deaths recorded since the onset of the pandemic, which is estimated to be around 140,000. The second wave of Covid-19 has had a particularly devastating effect, with the number of deaths more than doubling in comparison to the first wave. Meyer also addressed the increase in provisions made by Momentum in response to the ongoing pandemic. The company raised its Covid-19 provision by an additional R655 million, reflecting the uncertainty and potential impact of future waves. Meyer noted that while the current provisions could potentially cover a third wave that is in line with the first wave, a severe third wave similar to the second wave would necessitate further provisions. The discussion also touched upon business interruption claims and the legal implications surrounding such claims. Meyer informed that Goddard, a subsidiary of Momentum, had proactively settled with most claimants and had paid out approximately 335 million in business interruption claims. This amount is expected to increase to around 400 million once the remaining claims are settled. With a significant portion reinsured, Goddard's exposure stands at around 68 million. Looking ahead, Meyer shed light on Momentum's Africa portfolio and the company's strategic focus in the region. He clarified that the business decisions regarding exiting certain African markets were not directly tied to the Covid-19 pandemic. Momentum had already embarked on a strategy three years ago to exit several African countries, with the recent sales of their Zambian and Tanzanian businesses completing this process. Currently, the company is active in South Africa, Botswana, Namibia, and Ghana, while also maintaining operations in Mozambique. Plans to exit the Kenyan market are underway, but the other four countries will continue to be part of Momentum's business as usual. In conclusion, Momentum's financial performance has been significantly impacted by the ongoing Covid-19 pandemic, with the second wave proving to be particularly challenging. The company's proactive approach to provisions and claims settlement reflects its commitment to navigating the uncertainties brought about by the pandemic and ensuring financial stability in the face of future challenges.