Santam hammered by KwaZulu-Natal floods
Short-term insurance group Santam has reported that it had paid out a record R14.2 billion in claims over the first half of this year.
It said that this was a result of the most challenging underwriting periods in the company’s history. One of the primary reasons for such high value in claims was the severe flooding in KwaZulu-Natal earlier this year that wiped out businesses and homes, resulting in crushing economic effects, said Santam.
In its latest interim financial report for the six months ended 30 June 2022, Santam estimated its current gross exposure to floods to be R4.4 billion. However, significant adjustments to gross exposures may still occur.
“The KwaZulu-Natal floods were the most significant natural catastrophe in Santam’s history,” said the insurer.
It noted that its reinsurance programme provided effective protection against the natural catastrophe and limited the net impact to R566 million, including reinsurance reinstatement premiums.
The net underwriting margin for conventional insurance was 2.3% (6.7% in June 2021), below the group’s target range of 5% to 10%. Other contributing factors to the below target underwriting results were increased claims inflation, which escalated ahead of premium increases, more than expected large fire losses and an increase in a power surge and crime-related claims, said Santam.
“The KZN floods severely impacted the underwriting performance of the property class. It was partially offset by the release of CBI claims provisions of R397 million, resulting in an underwriting loss of R328 million.”
Despite such headwinds, the group reported acceptable financial results with a 7% gross written premium growth – up 2% from the year before- and a consistent economic capital coverage ratio of 157%, within the insurer’s target range.
Over the year’s first six months, Santam saw a 409 cent per share (cps) decrease in headline earnings due to weaker operating results and lower investment income attributable to shareholders.
Expectations
Tavaziva Madzinga, the chief executive officer of Santam Group, said that he expects that economic activity will, in the short to medium term, will be constrained by weak consumer spending.
“The high inflation environment also pressures claims costs, while load-shedding in the first half resulted in increased power surge claims. In addition, there has been a significant increase in reinsurance premium rates, following several large global and local catastrophe events.”
“We are confident that the corrective actions we have implemented will start to show a positive impact towards the latter part of 2022. These are primarily in the form of underwriting actions to address the impact of increased claims costs and reinsurance rates. They include procurement efficiencies, segmented premium increases, and higher claim excesses,” said Madzinga.
Loading ...
