Santam posts good results in tough economic climate

The net underwriting margin of 9,6% for the year ended 31 December, 2015, was a result of positively disciplined underwriting actions and a relatively benign claims environment. The group reported gross written premium growth of 8% (excluding cell captive insurance business) in the current low-growth economic environment.

Chief Executive, Lizé Lambrechts, said Santam’s underwriting results were achieved in competitive market conditions. “We continue to operate in a tough general economic environment with low GDP growth and a weakening currency.”

Agricultural sector

“Growth in the crop insurance business was negatively impacted by the strong El Niño weather system and the consequential drought conditions in South Africa. The drought resulted in significantly less crops being planted, reducing gross written premium for the crop insurance class by 19% compared to 2014,” Lambrechts said.

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However, the lack of rainfall also resulted in lower exposure to hail damage. The net underwriting profit of R131 million is significantly lower than the exceptional results of R251 million in the comparative period, following the favourable weather conditions experienced in 2014.

Property and car market

The property and motor classes achieved solid growth, notwithstanding the cancellation of specific unprofitable books of business on outsourced platforms. The motor class benefited from the 19% growth reported by direct insurance business, MiWay.

Lambrechts said the underwriting results in the motor and property classes of business improved substantially compared to 2014 on the back of lower claims frequencies and sustained corrective underwriting actions.

The loss ratio was negatively impacted by the catastrophic hail events mainly in February and November 2015, with gross claims amounting to R290 million (2014: R187 million).

International diversification

Santam’s focus on international diversification gained momentum with gross written premium from the rest of Africa (excluding Namibia), India, South-East Asia and China of R1,4 billion (2014: R1,1 billion). Santam Namibia reported gross written premium in excess of R1 billion for the second consecutive year, resulting in total gross written premium outside South Africa increasing to R2,4 billion (2014: R2,1 billion).

Future focus

The group’s focus in 2016 will be to maintain its profitable growth momentum in South Africa and increase its international diversification through the Santam specialist lines and Santam Re.

“A strategic focus area will be to support the development of the SEM general insurance businesses in emerging markets by allocating appropriate technical resources. In South Africa, focus areas include growing the business in new segments, developing Santam’s full multichannel capability and enhancing risk assessment,” Lambrechts concluded.

The Santam board has declared a final dividend of 528 cents per share, up 10% on the dividend of 480 cents per share declared on 2 March 2015.