Santam results hit by multiple ‘catastrophe events’ – including fires, hailstorms and floods
Short-term insurer Santam said its results for the six-month period ended June 2019, were impacted by a number of catastrophes, resulting in more claims.
The group said it achieved Gross Written Premium (GWP) growth of 8% on its conventional insurance book and a net underwriting margin of 5.3% (2018: 8.4%), comfortably within the group’s 4%-to-8% target range.
Lizé Lambrechts, Santam Group chief executive officer, said the beginning of 2019 saw more significant catastrophic events compared to the same period in 2018.
“The underwriting results in the current period were negatively impacted by multiple catastrophe events that included the Betty’s Bay fires, hailstorms and floods in KwaZulu-Natal. These resulted in higher catastrophe claims compared to 2018, compounded by losses incurred on the crop business due to hail damage,” she said.
“Additionally, South Africa’s structural economic challenges continued to impact trading conditions. Within this context, we are pleased with this solid set of results, and in particular, our strong growth,” Lambrechts said.
Financial highlights:
- Headline earnings per share down 3%;
- 8% growth in gross written premiums for conventional insurance;
- Conventional insurance underwriting margin of 5.3% (2018: 8.4%) remains within target range;
- Investment return increase to R800 million (2018: R580 million);
- Return on capital of 25.4% achieved;
- Gross claims paid of R9.7 billion;
- Interim dividend of 392 cents per share, up 8%.
The Santam Specialist business experienced strong growth in the property and engineering classes. The Santam Personal and Commercial business achieved below expectation growth in the difficult economic climate in South Africa, while MiWay maintained its’ strong growth momentum from the second half of 2018 and reported GWP growth of 9%.
Santam said its property class rose 12% on the back of strong growth in the corporate property business following lower reinsurance capacity available in the market and strengthening of premium rates.
The motor class grew by 3%, with growth in the commercial segment under strain due to difficult market conditions, it said.
The specialist classes reflected good GWP growth with liability reporting 11% growth, transportation 8% and accident and health 12%. Santam said the engineering class benefited from a number of large construction projects mainly outside of South Africa, and reported growth in GWP of 36%.
“Gross written premiums from outside South Africa increased by 21%, benefitting from strong growth in the corporate property and engineering businesses on the African continent, as well as from Santam Re in South East Asia, India and the Middle East. Good progress was made in establishing a Pan-African Specialist Insurance business with Saham Finances and the benefits from co-operation should start to realise from 2020 onwards,” Lambrechts said.
The Santam Commercial and Personal intermediated business reported solid underwriting results, although lower than its exceptional 2018 results.
The motor class reported strong underwriting performance in the intermediated and direct distribution channels. The MiWay underwriting results were not significantly impacted by the catastrophe events during the period, resulting in an improved loss ratio of 54.2% (2018: 55.7%) and an underwriting profit of R203 million (2018: R159 million).
Large claim losses in the corporate property and marine businesses negatively impacted the Santam Specialist business, while the trade credit business incurred higher-than-anticipated loss ratios, the group said.
Overall Santam said it achieved R621 million in net underwriting result, with net investment income attributable to shareholders at R800 million, contributing to an overall profit before tax of R1.576 billion.
Outlook
Looking ahead, it said that trading conditions remain very competitive in a low-growth South African economic environment. “It is expected that economic activity will, in the near term, be constrained by weak consumer spending.”
Lambrechts said 2019 was the final year of Santam’s Vision 2020 strategy.
“The group remains focused on delivering our goals and brand promise of Insurance good and proper. During the first half of 2019 we have carefully considered the changes required to the strategy to make Santam ‘future fit’ and we will finalise these by November 2019,” she said.
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