Santam shareholders get windfall - despite record R24.5 billion paid in claims

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Santam paid R24.5 billion claims in 2021. But only R3.2 billion of that was for the business interruption claims related to the lockdown. Photo: Estate Living
Santam paid R24.5 billion claims in 2021. But only R3.2 billion of that was for the business interruption claims related to the lockdown. Photo: Estate Living
  • Santam declared a special dividend for the past year. 
  • It paid the highest amount of claims in its history in 2021, but only R3.2 billion of the R24.5 billion went towards business interruption claims related to the lockdown.
  • Most of the money went towards catastrophe claims from large-scale fires and floods in Gauteng and KwaZulu-Natal.

Santam paid R24.5 billion in claims in 2021, the highest in its 104-year history.

The Sanlam-owned insurer said this was not even driven by the business interruption claims that it fought all the way to the Supreme Court of Appeal (SCA) - only to lose.

Only R3.2 billion went towards paying business interruption claims related to lockdown, including the R1 billion in relief payments that the insurer paid to clients in August 2020. Santam is still finalising many of the claims.

Instead, catastrophe claims from large-scale fires, weather events that significantly affected agriculture, as well as floods in Gauteng and KwaZulu-Natal drove the historic increase in claims. At the same time, claims on the motor book and personal lines - which were lower during lockdown - returned closer to pre-pandemic levels.

Santam also facilitated the payment of R1.1 billion in claims related to the July unrest. The state-owned insurer Sasria will reimburse the insurer for that amount.

Santam said the SCA judgment gave it the legal clarity it needed on how long it should provide cover for the client's losses. 

So, it has reviewed its provisions for business interruption claims at year-end and has set aside R450 million provisions than it initially calculated. In December 2020, the insurer made a R3 billion financial provision for these business interruption claims.

"The reduction is mainly due to the actual claims experience to date being lower compared to initial estimates and positive feedback from Santam's reinsurance panel on its catastrophe reinsurance claim. However, there is still uncertainty about the ultimate exposure, which will only be eliminated once the process has been finalised," wrote the company in the results announcement.

Thanks to this decline in lockdown claims provision, increased investment income, growth in written premiums, and improvement in the group's underwriting margin from 2.5% to 8%, Santam's headline earnings per share increased to R24.95 per share from R9.05 per share in 2020.

Santam declared a final dividend of 790 cents per share and a special dividend of 800 cents per share. The insurer paid no dividends in 2020.

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