Santam cheers fewer catastrophes
The Santam group on Thursday reported a 72% increase in headline earnings per share for the six months ended June 2018, to R10.18 per share, as it welcomed the ‘absence of significant catastrophe claims’.
It reported gross written premium growth of 13% to R15.59 billion – 9% excluding the impact of the Santam Structured Insurance acquisition in March 2017 – “and delivered excellent underwriting results under difficult economic circumstances”.
Cash generated from operations increased to R2 billion (2017: R1.6 billion), positively impacted by the improved claims experience, it said.
A return on capital of 30.3% was achieved, while Santam declared an interim dividend of 363 cents per share, up 8%.
The conventional insurance business reported a net underwriting margin of 8.4% compared to the 4.2% reported in 2017.
“The underwriting results in the current period benefited from the absence of significant catastrophe claims in contrast to the severe Knysna fire losses in June 2017. Fewer large commercial fire claims were also reported during this period,” Santam said.
In March, it noted that it paid out R19 billion in claims in results to the end of December 2017. The results, it said, followed a year impacted by major disasters which included the devastating Knysna fires, floods in Durban and hailstorms in Gauteng.
The intermediated personal and commercial lines business and MiWay experienced pressure on growth given the difficult economic conditions, Santam said. ‘Excellent growth’ in the specialist business and Santam re contributed to the 9% gross written premium growth reported for Conventional Insurance, however.
Santam said that the motor class grew by 7%, with MiWay reporting 6% growth (gross written premium of R1.218 billion; 2017: R1.148 billion). “MiWay saw a slowdown in growth from the second half of 2017 due to an increased focus on profitability, as well as the impact of the economic strain on consumers. The commercial and personal lines intermediated business similarly experienced a slowdown in growth of the motor book.”
Looking ahead, the group said that trading conditions remain very competitive in a low-growth South African economic environment, which translates into limited growth of insurable assets for the insurance industry.
GDP contracted in the first quarter of 2018 and the South African Reserve Bank reduced its growth forecast for 2018 to 1.2%.
It is expected that economic activity will in the near term be constrained by weak consumer spending linked to the recent increase in value added tax and by unemployment, which is at near record levels. Inflation (annual CPI) of 5.1% was reported at the end of July 2018, Santam said.
“The group’s focus remains on growing profitably in South Africa and increasing its international diversification through the Santam Specialist Business and Santam re,” it said.
Read: Santam results boosted by improved underwriting conditions
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