Santam, South Africa’s largest general insurer, reported solid growth in the six months to end June, but its management has adopted a “cautious approach” to second-half prospects because of the increasingly unpredictable and extreme weather.
The group reported an 8.1% gross written premium (GWP), a 7.1% net earned premium and 6.5% net underwriting margin growth rate. Santam CEO Tavaziva Madzinga said the net underwriting margin tended to fluctuate, but was up on the 3.8% of 2023 and within their target range of 5%–10%.
Madzinga said in an online interview that the period was impacted by inclement weather and Santam was able to protect its policyholders by paying R607 million in weather-related claims, which was well up on the R150m paid out at the same time a year before.
He said they were adopting a cautious stance about prospects for the second half because of the possible effects of the La Niña weather phenomena on rainfall in the second half, and the possible impact of hail in some parts of the country in the fourth quarter.
“The frequency and severity of losses from inclement weather conditions have increased substantially over the past decade, including in South Africa, which has traditionally been seen as a benign catastrophe environment,” he said.
He said they had implemented a number of underwriting actions in response to the elevated levels of claims frequency, severity and inflation experienced over the past number of years. The company had also addressed power surge losses successfully, and some improvement from this was expected in the second half from the absence of load shedding.
The property class reported a net interim loss of R203m in the first half due to weather-related and other large losses. Improved risk selection and underwriting in response to the roll-out of geo-coding prevented losses in excess of R150m from these events.
A number of underwriting actions had also been taken on the motor book, but the declining new vehicle market was impacting the business, he said.
Nevertheless, most business units at Santam delivered underwriting margins in excess of 2023. The Specialist Solutions business, however, declined slightly due to a number of large claims in the Crop and Marine businesses, when compared to a more benign claims environment in 2023.
Santam’s return on capital was 33.6% net attributable income increased by a sturdy 34%. An interim dividend of 535 cents was declared, up 8.1% over the same period last year.
Headline earnings per share increased by 34.9% to 1 578 cents. Gross claims paid during the first half amounted to R14.2 billion versus R14.6bn at the same time last year.
The group reported an investment return on insurance funds of 2.3% (2023: 2.2%) of net earned premium that benefited from solid returns on local and global fixed-income investments, a favourable investment market performance and an out-performance of portfolio benchmarks.
Santam made progress on its FutureFit 2030 strategy, that included a new omni-channel operating model, which helped it to navigate challenges.
There was double-digit growth at Santam Re following a restructuring process and the cancellation of underperforming business in 2023. The alternative risk transfer businesses grew profit by 63%.
The Broker Solutions and Client Solutions businesses continued to strengthen premium rates.
MiWay achieved overall growth of 7%, compared to 4% in the first half of 2023. The growth in new policies was marginal but satisfactory given the tough consumer environment, said Madzinga.
The company’s new inbound and tied agency strategies benefited business insurance with growth in excess of 30%. The motor class grew by 5%, with growth of 12% recorded in the property class. The motor book showed a strong recovery.
BUSINESS REPORT