JOHANNESBURG – JSE-listed investment holding company Rand Merchant Investment (RMI) said on Friday that its headline earnings fell by almost 50percent for the year to end June, mainly due to the significant provisions raised in Discovery and Momentum Metropolitan Holdings for the expected effects of Covid-19.
This comes after Discovery made a provision of R3.4billion for future claims and lapses in the year to end June, while Momentum raised additional provisions with a net negative impact of R983million for potentially adverse Covid-19 related claims, policyholder lapses and withdrawals.
As a result, RMI reported a 49percent slump in headline earnings to R1.96bn for the year to end June, down from last year’s R3.8bn.
RMI has a 25percent stake in Discovery and a 27.3percent stake in Momentum.
RMI’s other investments include stakes in Hastings, OUTsurance, AlphaCode and RMI Investment Managers.
The fall in earnings of 26percent in Discovery and 51percent in Momentum Metropolitan resulted in both companies not declaring a dividend at their year-end.
RMI said on Friday that the heightened medium-term economic and insurance-related uncertainty had necessitated a revision of its dividend policy.
“The board has decided that RMI will not be declaring a final dividend for the year to end-June. This position will be dynamically assessed over the coming months,” the group said.
Last year, RMI declared a final dividend of 65cents a share.
RMI’s normalised earnings declined 24percent to R3.09bn. Headline earnings per share from continuing operations fell 49percent to 127.8c, while earnings per share from continuing operations declined 63percent to 98.9c.
Discovery’s normalised earnings declined 26percent to R3.75bn, and Momentum Metropolitan’s normalised earnings fell 51percent to R1.52bn.
OUTsurance reported an 8percent decline in normalised earnings to R2.4bn including its stake in Hastings.
“Excluding its share in Hastings, OUTsurance’s normalised earnings decreased by 7percent to R2.2bn, mainly attributable to the unrealised investment losses on the group’s equity portfolio, the impact of the bushfires and natural catastrophes in Australia and business interruption claims of R198m paid and provided for in OUTsurance business,” the group said.
RMI said Discovery’s shared-value business model positioned it well to deliver continued operational resilience despite the challenging macro environment.
“Many of Momentum Metropolitan’s growth initiatives within the reset and grow strategy remain relevant despite the challenging environment. Work on delivering on these initiatives continues. This includes sales and service, product improvements, advancement of digital capabilities and greater cost efficiencies,” the group said.
RMI’s shares fell 3.33percent on Friday to close at R28.19 on the JSE.