Momentum Group Limited (MTM) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Momentum Metropolitan Holdings First Quarter of 2022's Update. [Operator Instructions] Please note that this event is being recorded. I'd now like to hand the conference over to Mr. Hillie Meyer. Please go ahead, sir.

Good morning, everybody, and thank you for joining us. I will kick off, and I'll be followed by Risto. I will focus on maybe just highlighting some salient features on the normalized headline earnings numbers and talk a little bit about our new business volumes; and then Risto will focus in more detail on COVID-19. And also a few comments on capital and capital management. Now if you look at one quarter, especially in our financial insurance company, you always have to be a little cautious because one quarter is such a short period for an insurance entity. But this was a very important quarter. And therefore, I think it is definitely worth looking in a little more detail at our numbers, I mean, and it was important because of the impact of the third wave on our numbers and so forth. So we're happy to share with a normal detail that we normally provide. Starting off with normalized headline earnings, the number is ZAR 711 million. Now obviously, that was after releasing COVID provisions of around ZAR 1 billion. So we've got to see it in that context -- that provision, obviously, the results would have looked pretty dismal, but we did make the provision. Obviously, we're holding pumps that our provisions going forward will be sufficient. And to a large extent, our fortunes for the rest of the year will be dependent on how severe the next wave and maybe even a wave after that will be. As we said all of that, we're actually quite happy with the number of ZAR 700 million. I think if we remove the impact of COVID, then if we remove some of the noise with investment, some investment returns, then this quarter's number would have been closer to ZAR 1 billion. Now again, there are some small little numbers like, for example, in Guardrisk, there was a positive 50 million or so will not be -- happen every quarter and so forth. But by and large, I'm very comfortable that our earnings for the quarter, if you remove the impact of [indiscernible] investment -- [ one source and COVID one source ], then we, in fact, as I mentioned, close to ZAR 1 billion. And certainly, even if you remove some of the other [indiscernible] positives would still be in the high 800s, which, I think, is again in line with what we would like to do in the normal -- in a normal quarter. So it was not a normal quarter. But if we try to look at what was normal in the quarter, we're quite happy with where we are. And you'll see that on the non-life side, as Momentum Corporate is concerned and as far as the Health business is concerned, we are happy with the earnings numbers for the quarter. Investments were okay. And then below par, contributions were from Momentum Life in Africa, in particular. And then Metropolitan suffered a bit, a little bit from COVID, but also there was some adverse persistency experience. Now we're going to a bit more detail in the report itself in the update, but we believe we are able to -- correction, which hopefully is a [indiscernible]. So all in all, fairly happy with the earnings number. As far as new business is concerned, clearly, that's a very positive picture. And I think that's sort of a continuation of a positive trend. And you can -- looking at the details outside the only area where we would like this to look a little bit better is Momentum Life itself, which compared to the comparative quarter was relatively flat. Now the prior quarter was a good quarter for Momentum Life. But we also know that Momentum Life didn't have the stellar performance that we added investments and so forth towards the latter part of the prior financial year. And also [indiscernible] a little bit deeper in Momentum Life when contraction of new business on the protection side was compensated for on the savings side, which is probably something that we would have preferred it the other way around. But having said that, one will only, really, I think, get a better idea of our performance once we know what competitors were up to, especially as far as the protection business is concerned. Investments did well. That's there for everybody to see single premium, wealth platform business [indiscernible] Metropolitan continued on its strong growth trends, that's very encouraging. Also, the business mix is very healthy. Momentum Corporate saw strong growth in recurring premium new business, which, again, is very, very encouraging, doing other FundsAtWork. And then Metropolitan -- Momentum Metropolitan Africa, I think, boosted a little bit by some significant corporate savings business in Lesotho and Namibia. And because of the positive new business numbers, obviously, it also put through the VNB, which -- where we saw a very decent or more than decent increase of 48%. And I think quite a healthy margin overall for the group new business margin of [ 49%]. I think just in that context, just briefly talking about the rest of the year and maybe beyond that. We're very happy with the operational performance of the group. Earnings, as I mentioned, it has not normalized yet. So there is uncertainty. But if we stretch a little bit deeper, we're very happy with our performance. On the earnings front, there's some -- I think the fundamentals of the business are good. Obviously, we remain cautious about the economic environment itself, still with headwinds rather than tailwinds. We are hopeful that the fourth wave will be modest compared to the second and the third wave. But we've also learned that it's really difficult to predict. So we'll have to see how that pans out. But just in conclusion, then I'll just say that if you -- we're quite happy that we, on a group trajectory, and we remain committed to our event and grow targets for the longer term. Risto?

Yes. Thanks, Hillie. I'll talk a bit about COVID and then about capital. Now COVID, obviously, you can't really talk about the results without going into that. You would have seen in the trading update that we said that we paid ZAR 4.6 billion of debt mortality claims during the quarter. Now that is about 3x the normal level of claims we'd expect for those 3 months. So if you do the math, the excess claims before reinsurance and capital at about ZAR 3 billion for the quarter. The most affected was Momentum Life in terms of excess mortality. And that is largely -- there's a lot of factors, but I would say the 2 main ones is it is a slightly older policyholder base. And also, there is quite a bit of exposure towards the [indiscernible] region, which was badly affected in the third wave. The least affected was Metropolitan Life and then Momentum Corporate, you could say, sort of in between those 2. Now once we take into account reinsurance and tax, that ZAR 3 billion of excess claims becomes ZAR 1.2 billion. Now that's an important number to write down for a comment I will make a bit later. But also, ZAR 1.2 billion, we have released $900 million roughly of mortality provisions for COVID in South Africa, leaving us with about ZAR 250 million net loss on the South African Life businesses. We are left with provisions of about ZAR 1 billion for the South African Life businesses. Now think about what I said earlier that in the last quarter, we had excess claims of ZAR [ 1.2 ] billion after reinsurance and tax, and we have ZAR 1 billion of provisions left. It's about an 85% ratio. So I give you some idea of how well we are provisioned going forward. October was still, claims were higher than normal. November has been close to normal. So if you take away the October experience, I would argue, as we sit here, we can afford a wave -- fourth wave roughly 70% of the third wave without needing to raise further provisions. As Hillie said, there are a lot of opinions about the fourth wave. Most people do expect the fourth wave to be lower than the third and the second wave. Some people didn't think it might be lower than the first wave. Obviously, the vaccine hesitancy has been a bit disappointing for us. We have some interesting data in our own book that suggests that the vaccinations do have a very good impact on mortality. One is, for example, on the Momentum Life side, we have our closed book where a lot of the clients are in the 80s, 70s, and then we have Myriad with a [ plan fund ] at 40s, 50s, the relative mortality of the really old clients was much better in this way than of the younger clients. And that's because they've got their vaccinations earlier in the process. The other one we picked up is in corporate, the health care workers who got vaccines earlier actually showed a much better mortality in this wave than other occupations where it's different in the earlier waves. So there is quite a bit of data in our books suggesting that the vaccinations, as they are expanded, will have a positive impact in bringing mortality closer to normal. Then in Africa, we also had excess claims. Now Namibia and Botswana, a particularly hard hit. I would argue that if you look at the Capital, the third wave in Namibia and Botswana was, at least as bad as South Africa. So where [indiscernible] country sort of avoided the worst in the first 2 waves, they did catch up a lot in terms of the third wave, in terms of excess mortality. Overall, I would say that we are [ reasonable providers ] as long as the fourth wave isn't significantly worse than, let's say, the average view out there. Moving on to capital. Our main South African life insurance license, which accounts for 60% of the group capital. The solvency ratio improved from 1.73 to 1.78 during the quarter. So it is now roughly in the middle point of our target range. The solvency was aided mainly by improving funding levels in the Smooth Bonus funds and also other equity stresses that we do as part of the [ FCR ] exercise. So you could say rising markets to some degree aided the capital ratios. The obvious offset was the very high mortality claims that had a negative impact on our own funds. I would also remind people that the final dividend we paid recently was not paid out of the Life company. We entered year-end having excess liquidity at the center because of special dividend out of Africa in the previous year. So the Life company did not pay a dividend in the quarter, which added the capital ratio. I can confirm that the central liquidity remains good after the dividend payment, we have received the proceeds from the sale of IO as an example. So we still set a decent liquidity at holding company. If we move into Africa, a lot of the African markets have similar drivers to South Africa, quite of the Smooth Bonus business in them as well. So the improving funding levels also helped Namibia and Botswana as an example. So the solvency ratios have improved in majority of Africa regions as well. And lastly, in terms of capital ratios. If you look at the detail, you'll see Guardrisk insurance is now standing at 1.22x cover. We have been spending quite a bit of time in the last year talking about the reason why Guardrisk shouldn't really be more than 1.1x [ FCR ] most of the time. So the Guardrisk insured number is that we will consider a good number for that business, a strong number, and it reflects certain reinsurance optimization done recently. And also, as our relative size of our own promoter, which as higher capital ratios grows versus, let's say, the client sales, that's also driving the ratio up. So we're pleased with the capital ratio in Guardrisk insurance. Guardrisk Life is close to 1.1, which is normal. And then Momentum Insure remains well capitalized at 1.8x. Momentum Insure is now the legally merged entity, including -- that combined our [ old ] business and then the folks business we acquired a while back. Yes. So capital, we are happy. In terms of liquidity, I already mentioned central liquidity is good. I can also confirm that we continue to work on our sort of liquidity risk from perspective of annuity fund and guaranteed fund management. So we've done a lot of liquidity modeling and those gaps are also [indiscernible]. So yes, from an FD perspective, I suppose the results are pleasing, but the balance sheet is very pleasing, and I will leave it at that. And obviously, we'll be happy to take questions.

[Operator Instructions] The first question comes from Michael Christelis of UBS.

Four questions, if I can. The first one is Metropolitan new business margin. So we've seen very strong growth in your funeral sales there, much stronger than the rest of your recurring premium business, if I look at the numbers, yet your margin was flat, which is a bit disappointing in that context. Can you just sort of unpack that for me? Is it all economic assumptions? Or what else is driving that? The second one also related to margins is in the corporate business. So again, you've had a nice recovery from volumes, not certainly, not back where we were in 2019. But we're still seeing negatives there or 0 VNB there. What needs to happen here? Does that business need to be rightsized from a cost base perspective? Or is it just a matter of waiting it out for volumes to increase? And I guess with 2 years of very low VNB or negative VNB here, when does this start affecting the potential earnings coming through in future years as the book runs off? And then just a quick one on Momentum Insure. Your planned ratio has come down 8%, yet your earnings is roughly the same and your comment -- premiums are up slightly. I mean, does that imply your expense ratios improved by 8%? And if so, how sustainable is that?

Okay. Mike, they were only 3 questions. You said you have 4.

Well, there's 2 in the corporate one.

[indiscernible].

The margin and the other one about what the impact is on future earnings growth.

Okay. I'll take Metropolitan and then Hillie can maybe take corporate or Momentum Insure. He is in the Board of Momentum Insure. So I'll give that to him. But -- so on Metropolitan new business margin, I agree that the VNB didn't grow as strongly as one would maybe guess from the outside in terms of the volume, operational gearing. There're 2 main items. One is the mix within the risk business. Now Mike don't laugh, but there's a mix effect within the mix effect. So even within the risk products, there are different margins on the different products. So for example, the type of benefits we sold in the current period. I'll give you a good example, a very popular product was a funeral product with cash back every few years. I think it's every 5 years or something like that, that has lower margins than the traditional funeral product with no cash backs. So it's the mix within the protection business, that is probably the #1 reason. The second reason is that all of the businesses, almost all of the businesses are increasing their investment on the digital side, a lot of the digital side stuff does relate to agency, in this case, or channel enablement. So the cost growth would have also been a bit [indiscernible], I think, in terms of quarter-on-quarter. But the mix effect is an important one. Corporate new business margins still negative. I mean that business, I agree with [indiscernible] that funded work remains profitable from VNB perspective. On the large schemes, we continue to run a VNB negative. We haven't landed any mega deals, and you will know our history that when we land mega deals and the VNB margin looks great. And it leads to your second question is that the size of this business in terms of, let's call it, its new business platform. It does require to land occasional big deal to really make a good margin. Now there are variety of strategies in place in corporate. In fact, corporate is going to be quite careful in expenses compared to the retail division. Yes. We do need to look at a slightly more efficient, not massively, but slightly more efficient distribution strategy there. Yes, I probably don't want to go further into detail in that. Obviously, I would also say that in light of recent developments, one has to be a little bit conservative in estimating the margin on the business as well. So I think imminent volumes do pick up in the next quarter. New business margin might not pick up one for one. Yes. And then Momentum Insure. Okay. Just repeat the question about Momentum Insure, Mike...

You talked about the claim's ratio coming down from -- sorry, deteriorating from 51% to 58%, yet your profits are pretty much flat from the commentary and your -- it sounds like your GWP has grown slightly. So what that implies is your expense ratio has come down 8%. I'm trying to figure out how that's possible and how sustainable it is.

Yes. I mean I'll dig up a bit more detail. I know, for example, the reinsurance strategy has changed substantially. So we have reduced the level of reinsurance in that business significantly. So that might have an effect on your ratio as well. But let me just have a look at the short commentary here.

And I also -- I do know that the expense ratios did come down, whether it came down 8%, we'll have to check. But I think let's get the detail, Mike, we'll come back on that one.

And Michael, does not conclude for the moment?

Yes, it has.

[Operator Instructions] The next question comes from Francois Du Toit of Anchor Stockbrokers.

Just a quick one around your provisions for mortality for COVID still remaining. So you've got ZAR 1 billion provisions remaining ZAR 1.5 billion before tax more or less. Can you give us a sense of how [ tax ] up against the long-term change in mortality from COVID-19? Just following the weekly [ MRC ] stats, it looks like even post the waves and between the waves, mortality never fell anywhere near past expected levels. So assuming there's sort of a 10% long-term impact, how will that provision stack up versus that? And I think, Risto, you mentioned that the October mortality experience was only slightly above normal. Can you quantify slightly? Is that 5% or 10%. I think you do give us a sensitivity guidance to 5% impact of mortality on your value of in-force. So it'll be helpful to -- and maybe just if you've done any research or seen a new research around the possible long-term impacts on mortality from COVID-19 as well. You speak to the waves, and you've answered those questions for me. Thank you very much, but just not in terms of the long-term impact. And the second question relates to the losses in Aditya Birla, the Indian health insurance business. Disappointing given that as far as I could see for all other health insurance businesses, COVID has had either a small positive impact or no impact at all? And I think COVID is blamed for the weaker experience there in this last quarter. You can explain that maybe for us, please. You mentioned also just now in response to a question that there have been no mega deals. Maybe if you can comment in terms of whether you're working on any mega deals, it will be helpful as well. And then...

I'll take the last one first because you did see my hint about the next quarter. So we are working on some, let's say if we land in [indiscernible]. So that's a short answer. Now I'll deal with Aditya Birla next, and I'll do long term the last because that's the hardest one. So Aditya Birla, I think we mentioned there that there was about a ZAR 60 million impact on our profits. Now remember, we're only a 49% shareholder. So for the group, it would have been about ZAR 120 million impact. Now the reason why I suppose, COVID is in the India business is that people can go to private sector hospitals to get covered for COVID-related matters. So it's not like in some countries where the state has taken the main responsibility for these sort of things. So first of all, it is a covered thing. Secondly, the reduction in other procedures was very limited in this wave. In the first wave, there was an offset. In this wave, we didn't see much of an offset. So I think people were prepared to go to hospitals and to continue with their operations as planned, rather have been fearful like in the first wave in India. The last point I would make, and this is quite an interesting one for you, Francois, take a note, is we -- our partners in India are a little bit worried about the long-term impact of COVID on health inflation. In that the cost of claims has gone up in terms of testing, in terms of additional hygiene things and gloves and testing procedures and protective equipment. So there is definitely a slightly higher average claim size even on [ noncoverage ] claims. They can maybe be [indiscernible]. So's that's an interesting dynamic that we need to allow for going forward. Dan, yes?

Yes, Risto. Maybe what we can add as far as the Indian business is concerned is that what period did they report here because I...

April to June.

April to June, and I would say that they've seen a meaningful improvement in experience subsequent to that, a bit of a return to normality.

Yes. Yes, that's true. Then long-term mortality, that's a very good question because the short answer is, we have not allowed for it in our provisioning. So our provisioning really is based on 12-month forward view, which is largely the waves and a bit of allowance for excess mortality over the next 12 months. So we are allowed for the waves and then we're allowed for about 20% high claims between the waves. But we haven't changed our [ allowance ] for the long, long-term mortality. There are significant discussions in the industry, well, with the reinsurers, for example, and with mortality experts to trying to understand what the long-term impact is. I think the consensus view is starting to move towards that there will be some long-term impact on mortality. I think it will become consensus in the industry that unvaccinated individuals will pay quite a bit more than vaccinated individuals. Now that premium is dependent on your other health factors and your age. But I think people of, let's call it, below average health that are a little bit older, insurance might become very expensive if they're not vaccinated. The other thing you'll notice is underwriting standards have strengthened. So all of a sudden, the guys who sort of, borderline standard lives in our world, I think we're taking a very careful look at them. And then we are starting to ask about vaccination status in terms of our underwriting processes. Yes. So maybe not a satisfactory answer, Francois, in that, we have not made long-term mortality adjustments yet, and they are more likely than not to happen at some stage. It doesn't sound to be as big as what you're hinting at. but it would be a couple of percent, I think. I mean I'm not thinking of [ 10% ].

Yes. Yes. No, look, I think there's still a significant impact of the timing of waves in different provinces and so on. So it's not -- they're still at very elevated levels. I think at the moment, [ MRC ] is still reporting 10%, 15% additional debts every year -- every week compared with normal levels. So it should work long term normalized compared with that. But okay, just another quick question on [indiscernible] margins, which was new business value short of last year's run rate despite volumes being above last year's run rate. How much of that has got to do with the yield curve movement and maybe give you an indication of this further steepening of the yield curve and the recent yield curve movements in response to inflation concerns worldwide. And also, the [indiscernible] increase will impact VNB for this half year, for this quarter we are now.

Yes. Okay. Again, without being too specific, there's no disclosure [ cap ], you are right, there's a small negative impact. It's not -- the yield curve on its own is maybe not as big as for some other players because remember, we've got a lot of level premium product rather than or been escalating premiums. So our cash flows are maybe not as long dated on average, as could be the case somewhere else. However, you touched on something important, which is the expected inflation. The market implied inflation is going up all the time. And that is what we use by expense reserves. So it's the expense reserves that is a function of implied inflation that is starting to hurt us a little bit. So you're right, it's noticeable there. Yes, we can probably disclose a bit more at midyear, then we'll also have a bit longer period. But you're right, the market implied inflation is rising, and it's negative [ for our VNB and for our earnings ] actually.

The additional disclosure will be helpful. That's all for me.

The next question comes from Itumeleng Molefe of Standard Bank.

Just 2 questions on pricing. Is there any color that you can give on policies with guaranteed premiums? Have you quantified what the impact is going to be? And also, from a sales point of view, is there more of a demand on policies with guaranteed premiums? And my second question, again, on expenses. You mentioned that there is some underlying cost in implementing digital platforms. How long will it take to implement given that it might slightly impact the new business margins.

Yes, I'll do the guaranteed premiums and Hillie will do digital and [indiscernible] sitting here. When you talk [indiscernible] I'll know that answer. Okay. Okay. So guaranteed premiums, are you talking about mortality products at guaranteed premiums?

Yes. Given that you are looking to reprice to allow for the new risk?

Yes. Okay. So as we have mentioned before, repricing new business is not a big issue. It's more of a competitive matter rather than anything else. And I think we are seeing most people moving slightly upwards on the underlying risk rates. On existing business, we are looking at possibly repricing business. But remember, it's not only mortality, but there are other factors. There're lapses, there're expenses. So we're trying to find a balance of what we think is the appropriate repricing level. In terms of -- I think it's also important is, I don't think it might be as far broad as people think. For competitive reasons, I think we need to be a little bit careful. We don't reprice [ everything ]. We need to reprice where there's [indiscernible] between the theoretical premium and the current premium. In terms of new business demand, we already have quite strong guarantee period. So most of our products have 10- or 15-year guarantee period, which actually increased by 1 year, every 2 years, you pay premium. So we have -- tended to have good guarantee terms available. I haven't heard from the sales channels that we're seeing demand for our products because we got good guarantee terms. I haven't heard that. I think in a year or 2, once we have seen most of the insurance companies reprice, maybe the guarantee stuff will become a little bit more topical. You get my point that only once people have widely heard about these things, maybe they [ stop ] valuing the guarantees offered more. Before you clarify that it's mortality, we also have guaranteed income products and guaranteed return products, and those have been very popular. And there the steepening yield curve has actually helped quite a bit. Okay. So maybe the last thing I'll say on guarantees is we don't really allow for any repricing in our financial reporting. So it's not like earnings are going to drop if we don't reprice. It's more about if we reprice, then we might be able to get a bit of repeating earnings going forward. Again, I'm not sure if the industry practice is always like that because you could model repricing almost as a decision free in your reserving. We haven't done that.

Around digital now, there's not one answer because we've got many different digital projects. But I'll give you a bit of an overview of the biggest projects that's on the go. On the retail side, and this is really Momentum Retail, where our sort of distribution channel projects and so forth, where we've got quite a big digitalization project on the go. The -- I mean the increase in spend has been there for the last 2 or 3 years. So we probably won't spend less on digital going forward, but we do anticipate some savings because of all, I think, start to impact the number of [indiscernible] agents and maybe other staff members that we need in servicing our sort of retail distribution, especially onboarding, also some of the client service aspects and so forth. So the -- I think that increased digital space being -- back into our cost ratios for a while. And if anything, we're going to see a saving. On the health side, I think they will -- again, they continue to spend with what they currently spend, but you might have seen that [indiscernible] actually anticipate that over the next 2 to 3 years, the impact of some of the digitalization initiatives will result in an annual savings of ZAR 150 million per year, which is more or less the story for many of our digital projects. On Metropolitan, there -- a big sort of digital spend is really on the migration. That's got 2 years to go. So roughly somewhere in 2023, '24, we should get to the end of the migration project, and then there will be a saving of just a little bit shy of ZAR 100 million per annum. As far as corporate is concerned, I would say that over the next year or 2, we'll probably see an increase in digital spend there. So any sort of savings or improvement in savings will probably be 3 or 4 years from now. Momentum Insure -- as you know, as a result of the acquisition, there is a big migration project there. That's got about 12 months to go. I think we will probably reach the end of that migration in September next year. That's the current plan. And then that will also result in significant savings. I think we'll do well to [ then ] spend some of the savings by -- in some digital projects, but there will still be a meaningful saving. So I think in summary, there will always be digital projects. I think sort of -- the saving will be elsewhere in maybe a reduction in staff numbers or maybe faster turnaround times of service aspects and so forth. So I would -- in total, I don't really see digital spend coming down. Savings will come down in other areas. That's my view.

[Operator Instructions] The next question comes from Kevin Harding of Investec.

Just a follow-on question on the pricing. I just want to get a sense of your thinking around the decline in preventative screenings just generally across the board as a result of COVID? How that's impacting your thinking on, I guess, repricing on the in-force book? Or just trying to get your general thoughts on how sort of eventual risk may emerge and then impact your in-force book, particularly [indiscernible]?

Yes. Okay. So obviously, the repricing process has a number of principles. And I suppose the key principle is we cannot reprice individual clients. So for example, we can't go and say, okay. Because you are overweight or you have a certain condition that is previous posed to COVID, we're going to increase your premium by 50%. We have to do it on a whole cohort basis. We need to look at the whole book. So once -- and already, we have a certain number of policies out of the guaranteed period, we need to be able to show -- and the regulator actually wants you to explain how you do this. We need to show how we believe that your future mortality has changed. You cannot actually reprice for old -- you can't recover your past losses through repricing. Your repricing basis has to show what you think that future modality looks like, what the future interest rates look like and so on. So once we have a stronger view on future mortality, as I mentioned earlier, we haven't changed our mortality basis yet. Once we do that, we're in a better position than to also determine what will be the quantity of the repricing. Also, at that time, we need to also be pragmatic is that, let's say, some clients, particularly younger clients who are vaccinated, the impact is very limited. Then we might get a view that it's not worth increasing prices by 1% from a client experience perspective. So we might actually only increase prices for clients with substantial differences in theoretical and actual pricing. We might not do it one-off. We might tell the plants will rather do it in sort of a 3-year period, as example. Okay. So there's a lot of things we can do, but I think key principles that you need to be aware of is, number one, we can't go client-by-client. It has to be a forward-looking holistic view of the book. And also, secondly, we do have [indiscernible] client sale implications. We have commercial implications. So it's probably as much [indiscernible] in some ways to reprice the book. Yes. Does that give you some help? Also, I don't want to get into percentages because we are planning on implementing certain changes in due course. And obviously, that is quite sensitive. I wouldn't like to disclose to you, for example, what I think the premium difference would be between vaccinated and unvaccinated 50 year old. It could have [indiscernible] become reality in a couple of weeks or a couple of months.

So that's helpful, that clarifies.

Yes. Also, just one other for Mike. Mike, I look at the MSTI report, the expenses were lower than normal in the quarter, probably 2 things worth noting. One is that because we have reduced reinsurance a lot, we sort of finalized our reinsurance accounts including reinsurance profits and commissions and so on. And there was a one-off gain in terms of basically clearing out the reinsurance balances. And then secondly, our marketing expenditure was well below budget in the first quarter, which we expect to catch up in the second quarter. So those 2 factors will explain quite a big part of the ratio.

[Operator Instructions] The next question comes from of [indiscernible].

Can you please comment on the persistency across the different businesses?

Yes. It's actually been good in corporate. So I looked at the EV details other days. So corporate, we have a good persistency. Momentum Life, it's okay, close to expectations. Metropolitan Life had negative persistency variance during the quarter. But as Hillie mentioned that related to 2 specific issues, now some of you might know that we write the latest funeral products on the Myriad product administration system. That's obviously for efficiency reasons and technological benefits long term. But -- there was some -- there was a tranche of policies where we didn't left the policies on the [ third missed ] premium. So there was a bit of catch-up of lapses in August, I think. And then secondly, we do some affordability checks on our new clients, and that module wasn't really working for a couple of weeks as well. So we accepted business that may be from a credit perspective [ issue ] not because of the high [ last ] propensity. So both those, let's call it, teething problems have been sorted out. [indiscernible] about database addresses and things like that. So I really do think that ZAR 50 million of the persistency variance in making the current period with 2 one-offs. Yes, so I would say on average persistency is in line with expectations with better than expected in corporate versus expected in net -- but in net, we know the specific reasons.

Does that conclude your questions?

Yes.

[Operator Instructions] We have no further questions from the telephone lines. I will now hand over back to Mr. Hillie Meyer for closing comments. Apologies, we just have one person just queued. Question coming from Saul Miller of Truffle.

I just wanted to just -- I wanted to clarify premium increases in terms of the in-force book. And you said it's only allowed by cohort. So I mean can you define people that don't or that won't get vaccinated as a cohort and then increase premiums on that cohort then you should be able to protect yourself against the higher mortality from the unvaccinated because I presume that's really where the risk lies.

Good answer is on existing business, no. So we can't introduce new underwriting conditions to existing policies. So in new business, like I said, we can do what they want. We can have a different pricing for vaccinated, unvaccinated. For the existing book, the increase needs to be based on mortality as categorized at the point of sale. So we will have to pool vaccinated, unvaccinated mortality on premium increases with existing clients. But you could say that maybe the unvaccinated will score. And that is the reason why we're doing major efforts to try get our clients vaccinated. So that's something that one day when we've got a bit more time to sit down. I mean, we're not just sitting here twiddling our thumbs. I don't think people get vaccinated because -- [ genuine outage ] efforts to get our clients vaccinated.

Saul, does that conclude your questions?

Yes.

Gentlemen, that was the final question. I'm handing over now back to Mr. Hillie Meyer for closing comments.

Thank you very much. Once again, thank you, everybody, for attending. I'll just -- people that I mentioned earlier, we -- I think we're quite happy with the operational performance. We've seen that new business levels is continuing on the sort of current levels. I think maybe the comparative periods will become a bit more challenging. So I think the sort of increased rates that we've seen up to now will, obviously, normalize a little bit. And also, I think we were -- I think we were quite sort of proactive during the lockdown periods and so forth. So I think we probably -- that competitively very well during the lockdown periods and even that will probably normalize a little bit. And we -- but we are curious to see what the sort of permanent gains we might have made because we're pretty confident that we did increase our market share in many areas. But with that, let's all hope that the fourth wave is a bit more subdued than the others. And if infection rates are still going to be there, let's hope the impact on our -- impact on mortality is more in line with what we've seen in other countries. Thank you very much.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for joining us. You may now disconnect your lines.