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Santam steady as it continues to pay out CBI claims from the hard lockdown

Santam is making progress in the processing of CBI claims, for which Santam had paid R700m to policyholders as at the end of August. Picture: Karen Sandison, ANA

Santam is making progress in the processing of CBI claims, for which Santam had paid R700m to policyholders as at the end of August. Picture: Karen Sandison, ANA

Published Sep 3, 2021

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Santam, the short-term insurer, would pay out a dividend of 432 cents a share for the six months to June following a steady performance impacted by contingency business interruption (CBI) claims and claims on corporate fires.

Gross premiums written increased 10 percent to R20.07 billion. Chief financial officer Hennie Nel said they were satisfied with the results in that, while the company “did not shoot the lights out”, it had done well in an environment where there were no big natural catastrophes, and claims were returning to normal levels.

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The underwriting margin of 6.7 percent, he said, was “reasonably strong” and about midway between the group’s targeted margin.

He said possibly the biggest challenge the group faced currently was uncertainty in the low-performing economy, as much of the growth in the group was derived from economic growth.

“In this low-growth environment the only way to grow is to grow from our competitors, find markets in the country where we can launch new products, and find new markets outside South Africa. Our focus on digital is very big at present,” Nel said.

In the local market, he cited as an example the rolling out, initially in a limited way, of property insurance for spaza shops which would be easy for the owners to access and also be simple to make claims from.

Santam Group chief executive Lizé Lambrechts said extending their leadership position in South Africa remained a priority, and good progress was being made to implement the FutureFit strategy.

New cross-selling initiatives were launched with Sanlam, along with other new product developments. Another example of strides being made in digital innovation was the launch of MiWay Blink, the end-to-end digital motor insurance offering.

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Net investment income attributable to shareholders, inclusive of the investment return on insurance funds, was lower at R355 million (2020: R582m), mainly because of the lower interest rate environment and stronger rand.

Santam was making progress in the processing of CBI claims, for which Santam had paid R700m to policyholders as at the end of August. Nel said they hoped to complete the majority of claims in the next six months.

Santam had paid R1 billion in interim relief in August 2020, bringing total CBI payments to R1.7bn. Nel said the feedback the group received was that the interim relief payments had served a good purpose for policyholders at a time when they had needed the support.

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The underwriting performance of the conventional insurance segment saw the positive impact of limited natural catastrophes on the loss ratio partly offset by a number of large corporate fire claims and an increased motor loss ratio compared to the 2020 hard lockdown period.

The motor class achieved a satisfactory underwriting performance in the intermediated and direct distribution channels. Following reduced lockdown restrictions in February 2021, claims frequency and severity increased and the motor loss ratio returned to more normalised levels.

The underwriting performance of the property class also normalised after the CBI claims in 2020, although negatively impacted by a number of large fire claims during 2021.

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The Santam Specialist Business experienced negative growth, mainly due to lower premiums in the corporate property business.

In addition, heavy haulage and travel businesses continued to be negatively impacted by Covid-19. In contrast, the aviation and marine businesses returned to positive growth, while the engineering and liability businesses continued to report satisfactory growth.

MiWay achieved good growth of 11 percent.

Gross written premiums from outside South Africa written on the Santam and Santam Namibia licences grew 19 percent to R2.77bn.

Strong growth was achieved by the reinsurance business (Santam Re) and the Santam Specialist engineering business in Africa, Southeast Asia and India. Weak economic conditions impacted Santam Namibia’s growth.

Santam said that despite steady improvements in vaccination rates, economic activity was expected, in the short to medium term, to be significantly constrained by weak consumer spending from the impact of Covid-19, as well as the likelihood of further load shedding. Investment markets were likely to remain uncertain and volatile.

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