Group overview

Momentum Group

Momentum Group targets individuals in the middle and upper income markets, principally under the Momentum Life, Momentum Wealth, Momentum Health, RMB Asset Management and RMB Unit Trust brand names.

Overview

Momentum’s normalised earnings declined 18% to R1 649 million, mainly due to the negative impact of the significant drop in equity markets. Despite the decline in earnings, the return on equity of 23% was very pleasing, and Momentum’s capitalisation level strengthened to a satisfactory 1,8 times the Capital Adequacy Requirement (CAR). It is also pleasing to note that the earnings for the second half of the year represented a 23% increase over the first half earnings.

Decline in equity values impacted fee income

Group operating profit declined 24% to R1 328 million. Approximately two-thirds of Momentum’s operating profit is exposed to investment market returns, where the most significant exposure is to equity markets. The JSE All share Index reduced by 28% during the financial year under review, with a commensurate downward impact on asset-based fees. The investment income on shareholders’ assets benefited from the Group’s capital preservation strategy, which resulted in higher levels of interest-bearing instruments to back the Group’s economic capital requirement.

Business unit performance

New business margins reduced slightly from 2,1% in 2008 to 2,0% in 2009. The satisfactory operational performance in embedded value exceeded the negative impact of the decline in equity markets, resulting in a positive return on embedded value of 3,3%.

Momentum’s previous targeted economic capital range of between 1,7 and 1,9 times CAR was reformulated following the introduction of the FSB’s revised CAR methodology. After taking into account the guidance issued by the Actuarial Society of South Africa regarding allowances for credit and operational risks, the targeted economic capital range was reformulated to between 1,4 and 1,6 times CAR. Although the level of 1,8 times CAR (after the final dividend payment) exceeds the upper limit of this range, the board of Momentum is of the opinion that this buffer is appropriate in the current market conditions.

The results from FNB Insurance were particularly pleasing and, although there was some negative impact on persistency arising from pressure on consumers, the business benefited from good continued growth in sales to the mass market client base of FNB.

Momentum is proud to have been awarded the Financial Intermediaries Association (FIA) award for the Long-term Investment Product Supplier of the year for the third successive year.