Difficult underwriting conditions hit Santam
SANTAM, the short-term insurer in the Sanlam Group, said yesterday it had experienced difficult underwriting conditions, causing “a substantially lower insurance result” for the four months to April 30, compared with the same period last year.
Santam’s share price fell by up to 2.4% to R185.50 yesterday, which was in line with declines of a similar magnitude in both the nonlife insurance and life insurance sector indices on the JSE.
Santam said the profitability in the traditional Santam intermediated business had remained under pressure.
“A continuing high level of claims frequency and severity was aggravated by flood-related claims in Limpopo during January 2013 and on an increase in fire claims in the commercial business line.”
Proactive steps had been taken across the operations, underwriting and claims functions, and segmented premium increases were being implemented to assist the underwriting performance.
The crop insurance business was adversely affected by hail damage to summer crops in the eastern region of SA, as well as drought insurance input claims in the central and western regions of the country. This caused a significant underwriting loss in the crop insurance business.
The specialist business units — MiWay and Santam Re — delivered good underwriting results.
The company’s gross written premium growth was “satis- factory” considering continued low industry growth”.
The investment performance was marginally ahead of the market for the period. “Santam reduced its equity exposure by disposing of equities of R500m and taking downside protection on a further R2bn to date.”
With interest rates remaining low, the return on insurance funds was at a comparable level with last year. The results for the six months to June 30 were expected to be published on August 28.
Santam’s market capitalisation has risen from about R14.8bn in 2010 to R17.6bn in 2011 and R21.7bn in 2012, according to the company’s 2012 integrated report. Yesterday it was R22.2bn.
The short-term insurer’s headline earnings per share declined from 1,367c in 2010 to 1,216c in 2011 and 1,367c in the 2012 financial year.
Santam had anticipated continuing pressure on its business this year.