Santam, the country’s biggest short-term insurer, has flagged low economic growth, load-shedding and under-pressure disposable incomes as risks to insurance growth.
In its first-quarter trading update released on Tuesday, it said high inflation and interest rates had weakened consumers’ spending power.
“Operating conditions during the period remained challenging, with insurance growth prospects dampened by the impact of electricity supply disruptions on economic growth and pressure on personal disposable income from elevated inflation and higher interest rates,” the group said.
“SA also remains a highly competitive insurance market. Underwriting conditions during the period were characterised by adverse claims experience, particularly from inclement weather conditions and ongoing power surge claims impacting the property class of business.”
The weakening of the rand in the past few days has led many analysts to predict that the SA Reserve Bank will deliver another big interest hike next week.
The Bank’s monetary policy committee in March increased the cost of credit by 50 basis points, the ninth consecutive increase since the Bank began tightening monetary policy in November 2021. Since then, it has hiked interest rates by a cumulative 425 basis points, to their highest level since 2009.
Santam, worth about R30bn on the JSE, said its subsidiary MiWay experienced “subdued” gross written premium growth in the period under review due to “pressure on consumers and a highly competitive market”.
“Good progress is being made with the rollout of MiWay’s strategic growth initiatives. We remain confident that these will contribute to accelerated growth during the remainder of the year,” it said.
The group two months ago reported it had paid out a record R29.8bn in gross claims mainly due to flooding, fire and crime.
The Tavaziva Madzinga-led group, majority-owned by financial services group Sanlam, said the approval by competition authorities to acquire the MTN device insurance book in SA would allow it to retain sufficient underwriting profit to achieve its required return on capital.
“Santam commenced writing new device insurance business through this arrangement during April 2023. Growth prospects for the venture are promising, to be augmented over time by the rollout of additional products,” the company said.
“The transfer of the in-force book of business, which will add some 400,000 policies to the Santam licence and annual gross written premium of nearly R400m, remains subject to regulatory approval, which is expected during the third quarter of 2023.”
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