Santam upped its final dividend despite a challenging 2022 that saw it pay out a record R29.8bn in gross claims due to flooding, load-shedding-related power surges, fire and crime.
SA’s largest short-term insurer raised its final dividend to 845c per share for the year to end-December, up 7% from the prior financial year. The higher payout came despite a drop of almost 27% drop in headline earnings to 1,826c per share.
“We’ve seen a perfect storm in the operating environment due to a combination of factors ranging from the floods in KZN to fire, vehicle theft and the impact of inflation on settling claims,” group CEO Tavaziva Madzinga told Business Day. “However, we believe we have taken the necessary steps to ensure that the impact of these factors are holistically and sustainably managed.”
Asked what he meant by “holistically managed”, Madzinga said Santam planned to keep premium increases “modest” mindful of consumer pressures while working with partners and vehicle manufacturers to reduce theft and improve vehicle recoveries.
Santam said adverse weather in the first three months of 2022 and the devastating floods in KwaZulu-Natal at the start of the second quarter pounded its underwriting results. The R29.8bn payout in gross claims was almost 22% above the R24.5bn it paid out in the prior year.
“That’s a big number — we’re paying claims at scale,” said Madzinga.
Higher-than-expected losses from fires and an increase in claims related to power surges and crime also eroded Santam’s net underwriting margin, which declined to 5.1% in 2022 from 8%. The net underwriting margin, which was near the bottom of the group’s target range of 5%-10%, was also hit by claims inflation as replacement costs escalated ahead of premium increases.
Still, Santam achieved an 8% growth in conventional insurance gross written premiums, which topped R35.4bn for the year.
Madzinga said that while load-shedding was “topical” one of the group’s biggest headaches in 2022 was rising vehicle theft, particularly high-end SUVs with keyless entry, which were found to be more vulnerable. However, he said Santam had worked with manufacturers to improve security measures while insisting that specific vehicle models driven in high-risk zones were fitted with tracking devices.
Santam’s underwriting performance was to some extent buffered by a further R317m reduction in provisions for Covid-19 related contingent business interruption (CBI) claims, which the group said was mainly due to claims being lower than initial estimates. Nevertheless, Santam said there was still some “marginal uncertainty” over the final liability for CBI claims, for which net provisions were also lowered by R397m in the June 2022 results.
The group’s commercial and personal business reported good growth in gross written premiums, while its specialist business also did well with its crop, travel, liability, marine and corporate property insurance businesses being the main contributors.
Subsidiary MiWay recorded subdued growth of 2% due to a deliberate focus on profitability, which Santam said affected new business growth. Low premium increases during 2021 and increased premium defaults in 2022 also contributed to lower growth.
Santam Re achieved acceptable growth in its third-party business, thanks to new business written during the reporting period and a general increase in reinsurance premium rates globally.
Gross written premiums from outside SA, written on the Santam Ltd and Santam Namibia Ltd licences, grew by 3% to R5.46bn. Santam Re in the Middle East experienced solid growth, though its performance was offset somewhat by fewer large engineering projects written in the rest of Africa.
The collaboration with Sanlam Pan-Africa (SPA) in specialist business across Africa also yielded positive results with gross written premiums rising 50% to R574m. Santam Namibia recorded what the group called “acceptable” growth of 5%.
Updated: March 2 2023
This story has additional comment from CEO Tavaziva Madzinga
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