The acquisition of Alexander Forbes short-term insurance business has not delivered the performance that Momentum Metropolitan Holdings (MMH) expected in the first half of the group’s 2022 financial year.
The Centurion-based insurer published a trading update on Monday showing that other parts of its business have left the Covid-19 woes behind. It is expected to deliver headline earnings per share that are 50% and 70% ahead of what the group recorded in the six months to December 2021.
However, write-downs at Momentum Insure will cause between a 15% and 35% decline in MMH’s earnings per share. Momentum Insure is the unit that acquired Alexander Forbes’s short-term insurance operations in 2019.
“The performance of the direct face-to-face sales force acquired from Alexander Forbes in 2019 was negatively impacted by Covid-19. The weaker general economy over the past 18 months and the complexities with the integration of all the different sales channels on a single line of business system resulted in new business volumes across all channels not achieving the targets expected,” said MMH in the trading update.
The insurer added that it did not expect that future new business will fully recover the gap created by Covid-19. That is why it decided to write off some goodwill in that business.
MMH spent R2.1 billion on the acquisition to grow its exposure on short-term insurance. Its Momentum Short-term Insurance business struggled to gain sufficient scale seven years after buying out Outsurance from its joint venture to become its sole owner.
The Alexander Forbes business was profitable. MMH attached a R1.4 billion goodwill to it at the end of June 2020. The acquisition immediately elevated Momentum Insure into one of the top ten short-term insurers in SA. By June 2021, Momentum Insure said it owned roughly 3% of the short-term insurance market share, and MMH climbed to fourth place in terms of gross written premiums when adding Guardrisk’s market share.
As for other MMH divisions, the group said Momentum Investments, Metropolitan Life, Momentum Corporate and Momentum Metropolitan Africa recorded solid new business revenue. It said Momentum Corporate and Guardrisk also had a strong financial performance.
The company said it witnessed a less severe impact of death claims from Covid-19 compared to the six months ended 31 December 2020. However, MMH did not indicate how Momentum Life, which serves upper-income retail clients, performed. That business recorded a R859 million headline loss at the end of the group’s 2021 financial year in June despite the growth in new business, thanks to Covid-19 death claims.-fin24
