June 16, 2021

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Santam sees up to R5.3bn in business interruption insurance claims

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NOMPU SIZIBA: JSE-listed insurance company Santam released annual results (to end December 2020) today. For the 12 months ended December 2020, the company reported that gross written premiums rose by 7% to R38.3 billion. However, they saw a slide in profit with headline earnings per share coming in at 1100 cents, down 47% on the year prior. A dividend for shareholders has not been declared.

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Well, to tell us more about how the company fared I’m joined on the line by Hennie Nel, the CFO at Santam. Thank you very much for joining us, Hennie. Despite a tough year with the pandemic in 2020, you still managed to up your business – that is, your gross written premiums – by 7%. Are you fairly satisfied with that performance?

HENNIE NEL: Good evening, Nompu. Yes, I think that is one of the areas of our business to be really happy with in a very difficult economic environment. We were able to grow our business, specifically MiWay, in South Africa. As you know, consumer spending is really under pressure, so we’ve done very well here.

And then also outside South Africa, our specialist businesses and the reinsurance business were able to find new business lines and bring those back to our licence into South Africa, which really supported the growth.

But the intermediated side was definitely much more difficult. We’ve seen very little new business available and there the growth was much more mundane.

NOMPU SIZIBA: Right. In the period you report having experienced gross insurance claims of just over R21 billion. That sounds like a lot of money. Was that significantly higher than the year before, and how much of that accounted for business-interruption claims?

HENNIE NEL: Nompu, that’s the biggest amount we’ve paid up to date in a year for Santam. Of the claims we settled during 2020, R1 billion related to the relief payments we made in August 2020 for contingent business-interruption claimants. That was included in that number.

NOMPU SIZIBA: What’s Santam’s position now on the whole issue of  the business-interruption claims in light of the Supreme Court of Appeal judgment in December last year?

HENNIE NEL: The good thing is we’ve got legal certainty now about those policies, so we started processing claims in January, and that process is now running. I think from our perspective we want to try and settle those claims as quickly as possible. The one outstanding matter relating to the indemnity period on a certain portion of the policies will go to the Supreme Court – hopefully as soon as possible; we’re trying our best to get that expedited with a view of also getting certainty on that, and really get to a point where we can settle the claims and move forward.

NOMPU SIZIBA: At least you know that this is a once-in-a-century event. So it’s not like this is going to happen again any time soon, or we hope not.

HENNIE NEL: Nompu, I couldn’t agree with you more.

NOMPU SIZIBA: So how did your emerging markets business fare?

HENNIE NEL: They were also impacted by Covid. But I do think, if I look at our business in India, it actually was also quite significantly impacted by slower growth, but it still performed well in terms of the investment returns out of the business in Africa that we hold with Sanlam. It has also actually improved its underwriting performance, mainly due to better loss ratios in the Moroccan business, specifically. That helped the underwriting results overall.

NOMPU SIZIBA: You touched on your car insurer MiWay. We know that of course in the first couple of months, maybe three months of lockdown, car insurers were smiling because there were hardly any claims happening at that time. But what’s the picture looking like since that time?

HENNIE NEL: It’s interesting. The moment we saw the lifting of lockdown regulations, claims normalised almost overnight. So we definitely saw a much more normalised environment during the second half of 2020, and that’s continuing into the new year. We saw slight benefit in January again with the lockdown, but I think we’ve seen much more normalised loss ratios coming through on the motor book.

NOMPU SIZIBA: Have your people done any analysis around the level of crashes and things during the period of the alcohol bans, for example?

HENNIE NEL: It is very interesting to see that statistic, Nompu.

The moment we see the lifting of the alcohol ban, literally overnight there is a significant increase in car accidents, which probably doesn’t talk well for us as a nation. But it has definitely got a big impact on car accidents.

NOMPU SIZIBA: Early in the lockdown last year, you indicated that you are going to be giving your personal and commercial insurance clients a financial break  by providing them with premium discounts. In monetary terms how much did that cost you as the insurer?

HENNIE NEL: We gave them discounts of just over R300 million for those two months of hard lockdown. What we’ve done subsequently is to issue new policies, where effectively a customer gets the benefit, for example, if he or she works from home; driving less concerns your motor premium. So we’ve also applied those new policies to really address the issue of people driving around less.

NOMPU SIZIBA: I see that you do have clients in the area of hospitality, tourism and aviation, for example. We know that these are the sectors that were really hard-hit for most of the time. So how have you been dealing with those clients?

HENNIE NEL: They were probably the hardest hit by the lockdown. From our perspective the relief payments we offered to clients in those industries –  we had the CBI extension – those we paid in August. We paid R1 billion within a month to people I think who really needed it at that stage. So that was one way we reacted. And then we definitely see the impact in terms of how those business are really under pressure. I think from an economic perspective the sooner we can get back to normality in terms of having tourism lifting up again, it will be good for those businesses.

NOMPU SIZIBA: Indeed, it will be. Of course there’s a lot of uncertainty this year. We don’t know whether we’re going to experience a third wave, and so on. Another speaker before this interview said they were anticipating that we will have a third wave, simply because we’re not going to be vaccinated in a timely fashion.

But what’s your outlook, given all the unexpected challenges that we may face in 2021?

HENNIE NEL: Nompu, I think 2021 will be difficult, with slightly better economic growth in South Africa. But still, consumers are under real pressure. In the business we’ve got a strategy, we’ve got some plans to really focus also on our digital enablement – both for intermediaries, to enable them to work better with clients, and also a direct offering. So there’s a focus for us to say, well, in this difficult environment how do we find ways to grow the business, and we must execute on those plans as well.

NOMPU SIZIBA: Indeed. Hennie, thank you so much for your time, sir. That was Hennie Nel, the CFO at Santam.

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