The board of insurer Momentum Metropolitan Holdings – which lifted earnings in the interim year to December 31 – has approved a further R500 million share buy-back scheme, which is due to commence shortly.
The new share buy-back is in addition to another scheme that saw the company mop up R750m, or 3%, worth of its own shares during the half-year period to December, the company said yesterday.
“In consideration of the strong capital and liquidity position, the Board has approved a further R500m for the repurchase of the group’s ordinary shares. These repurchases will commence following the release of the interim financial results,” Momentum Metropolitan said yesterday.
While the 2022 share repurchases were undertaken at a consideration price of R16.74 a share, the company’s stock traded 0.88% down at R19.24 in afternoon trade on the JSE.
Management at the company, which has a market capitalisation of R28.2 billion, said they would pursue the share repurchase scheme “subject to the share price remaining at a discount of at least 25%” of its embedded value.
In the interim period to the end of December, Momentum Metropolitan lifted normalised headline earnings by some 46% to R2.23bn. Operating profit for the period more than doubled to R1.89bn from R895m in the prior period.
“The quality of the earnings number is encouraging: it was a good all-round performance and without any significant positive one-off factors,” said Momentum Metropolitan Group CEO Hillie Meyer.
Meyer said: “While our earnings outlook has improved, our new business volumes did not meet expectations for some of the product lines, mainly as a result of the prevailing economic headwinds and lack of growth in the industry.”
The company’s stronger financial performance was underpinned by improved mortality experience, coupled with an improvement in investment variances, it reported. However, the group’s investment return declined by 47% to R332m, largely driven by “negative fair value movements” on its venture capital investments.
Despite the robust earnings out-turn for the December half-year period, Momentum Metropolitan said “disposable income remains under pressure due to rising interest rates and high inflation, as well as the lack of economic growth” in South Africa.
“This is likely to put ongoing affordability pressure on new business volumes, particularly on long-term savings and protection business. Investment business is negatively affected by other factors, such as low confidence in SA asset classes and by consumer preference to maintain assets in liquid low-risk investments.”
Despite this, the South African insurer declared an interim dividend of 50 cents per ordinary share, raising the cheque payment for shareholders by as much as 43% compared to the previous contrasting period.
Group finance director for Momentum Metropolitan, Risto Ketola, said the company’s 18.4% return on equity had provided the impetus and margin for a stronger dividend pay-out.
“We are pleased with the 18.4% Return on Equity for the six months. The high return on capital, combined with strong cash generation, has enabled us, again, to declare a strong dividend and to continue buying back our own shares at the same time,” Ketola said.
Momentum Life improved normalised headline earnings to R689m from R30m in the prior period, while Momentum Corporate increased normalised headline earnings to R556m compared to R370m.
Its Guardrisk division also raised normalised earnings increased by 18%, with Momentum Metropolitan Health’s normalised headline earnings improving by 55% to R146m for the period under review.
The group’s health business grew membership by 3% despite a tough economic environment as it was able to lean on continued growth in the public sector division.
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