Santam's earnings to bleed due to Covid-19 claims, Moroccan impairment

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A general view of Santam Insurance Head Office on June 24, 2020 
Photo: Gallo Images/Jacques Stander
A general view of Santam Insurance Head Office on June 24, 2020 Photo: Gallo Images/Jacques Stander

South Africa's largest short-term insurer, Santam, has warned investors that some of its earnings could tank by more than tenfold when it reports its financial results next month.

The insurer, which recently announced that it has set aside R1 billion to provide financial relief for some of its customers and has paid over half of that as it awaits legal clarity on whether it is liable for losses incurred during the lockdown, said its economic capital coverage ratio is now at the low end of the target range of 150% to 170%.

Santam said this coverage ratio which gauges the amount of capital it needs to stay solvent sat at 160% at the end of 2019. The provision for this relief to customers and business interruption claims that Santam has already paid are largely to blame for the fall in Santam's economic capital coverage ratio. However, the group which is owned by Santam is not panicking, choosing to characterise its operations and capital position as "resilient" in the face of volatility that it has faced over the past few months.

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