Santam, South Africa’s largest short-term insurer proved its resilience last year after paying out just under R30 billion in insurance claims and it was still able to pay out a competitive dividend, CEO Tavaziva Madzinga said yesterday.

He said the group faced its most difficult year to December 31, after adverse weather and devastating floods in KwaZulu-Natal in April, 2022; increased claims inflation ahead of premium increases; higher than expected fire losses; an increase in power surges; crime and motor theft-related claims, and weaker investment returns from financial markets.

Gross written premiums grew 8% in the year to December 31, (2021:5%) but the net underwriting margin was lower at 5.1% (8%). The net underwriting margin was at the bottom-end of the group’s target range of 5% to 10%.

The challenges were offset somewhat by less Covid-19 related contingent business interruption (CBI) claims provisions.

A final dividend per share of 845c (2021: 790c) was declared.

Santam paid R29.8bn (R24.5bn) in claims during the year, ensuring that policyholders impacted by catastrophes and other difficulties were compensated. Madzinga said they were happy to be able to pay this out to their clients in their time of need.

He said the results would not have been possible without concerted management actions in the second half to address things like policy limits and excesses, and to work with stakeholders, other partners and suppliers.

Madzinga said he was confident the current focus on growth initiatives should improve growth prospects for 2023.

Following a review, Santam reduced its net provision for CBI claims by R317 million, following the reduction of R397m accounted for in the June, 2022 results. The reduction was mainly due to the actual claims being lower than initial estimates. There remained marginal uncertainty about the ultimate liability, which would only be eliminated once the process was finalised.

Madzinga said the “strategy refresh process” in the second half was aimed at understanding, acquiring and servicing customers better through the enhanced use of data as well as a more focused operating model.

The new strategy would ensure Santam connected with policyholders through a shift to a focused multichannel approach complemented with ecosystem adjacencies and partnerships at scale. The broker partnerships continue to work well, he said.

“The commercial and personal multichannel business was restructured into three business units to focus on the distribution channels where we interact directly with clients, another on brokers, and the third on partnerships.

The other customer-facing businesses – MiWay, Santam Specialist and Santam Re would operate as before, and provide growth and diversification benefits.

“We will also have a business unit focused on managing our shared services in a co-ordinated manner to achieve better efficiency and delivery to our customer-facing business units. Our operating model changes took effect from January 1, 2023,” Madzinga said.

He said they expected trading conditions in South Africa and globally to remain “very competitive”. The company also anticipated high interest rates and significant inflationary pressures to continue to decrease disposable income in South Africa.

“It is our view that economic activity will, in the short to medium term be constrained by weak consumer spending.

The high inflation environment also put pressure on claims costs, while the ongoing load shedding would negatively impact economic growth.

“We are facing a significant increase in reinsurance premium rates, following several large global and local catastrophe events. We have implemented a number of underwriting actions to mitigate these challenges, which positions us well for future growth,” said Madzinga.

BUSINESS REPORT