After a relatively quiet 2018, Santam [JSE:SNT] was hit by "significant catastrophe events" in the first six months of 2019.
On Thursday, the company reported that the fires in the Betty's Bay area in January, hail damage in Newcastle in March and storm and flood damage in KwaZulu-Natal during April had a net impact of R221m on its half-year results.
In addition, its unit for crop insurance suffered an underwriting loss of R88m due to large hail-related claims from farmers. This is compared to a profit of R61m last year
Santam's half-year headline profit fell by 3%, as its net profit margin on underwriting "conventional" insurance policies declined from 8.4% to 5.3%.
While the group's gross written insurance premiums grew by 8%, its local commercial and personal intermediated (via brokers) business struggled with below-inflation growth due to the tough economy.
Its direct insurance business, MiWay, however, saw 9% growth in gross written premiums. Also, MiWay was less affected by "catastrophe events" and reported an underwriting profit of R203m - from R159m last year.
MiWay's clients increased by 5% to 315 000.
Following "unacceptably high losses", Santam announced that it will exit its trade credit insurance business, which provides insurance to exporters and importers.
Santam warned that trading conditions remained very competitive in the tough South African economy, "where limited growth of insurable assets for the insurance industry is experienced".
Businesses outside SA
Santam says good growth was achieved from its business in India. Its share of the gross written premiums of its emerging market unit increased by 28% to R1.6bn.
These businesses include a stake in the Moroccan Saham Finances (with subsidiaries in 26 countries in Africa and the Middle East), as well as businesses in Malaysia, India and 12 African insurers. The Mozambique cyclone and claims in the oil and gas sector, however, made some impact.
Good progress was made in establishing a Pan-African Specialist Insurance business with Saham Finances, said Santam, and the benefits from this cooperation should start to realise from 2020 onward. Santam owns 10% of Saham, while Sanlam holds the rest.