Santam takes gap to fuel growth
The company says it enjoys market share of about 22% in SA
The country’s largest short-term insurer, Santam, benefited from the space provided by reinsurers’ repricing and limiting their exposure to SA after a torrid year of catastrophic events.
Reinsurers insure the risks of other insurance companies.
Santam reported a 72% jump in headline earnings per share to R10.18, while the interim dividend advanced 8% to R3.63 per share. The company says it enjoys market share of about 22% in SA.
"With gross premiums written up 9% in our conventional business, as well as the underwriting margin we achieved of 8.4%, we are very happy with the result given the operating environment we faced," says Hennie Nel, Santam’s group finance director.
The conventional business refers to the commercial and personal short-term insurance risks the firm writes on bricks, mortar and motor vehicles.
The solid increase in the premiums written in the conventional business was in part due to the space provided by reinsurers, which were keen to limit exposure to SA after 2017, which saw a number of catastrophic events — including fires in Knysna and hail storms in Gauteng — affect profitability. "This has resulted in them either increasing premiums ahead of inflation or choosing not to absorb risk," says Nel.
This has provided Santam with an opportunity to insure more risk in the corporate property space in particular without having to affect margins.
Corporate property risk refers to any risk of damage to property at commercial locations and includes risks associated with mines and shopping malls, for instance.
Santam has maintained its policy of limiting single large corporate exposures to R85m, with anything greater than that placed with reinsurers.
The group also enjoyed strong results from the Santam Re business, which is active in Southeast Asia and the Middle East. Santam Re increased gross written premiums by 90%, to R609m.
Santam Re follows big reinsurers into risks the reinsurer is unhappy absorbing in totality.
In the example of a large mine, for instance, the reinsurer might want to place 20% of the risk in the market.
Santam Re would then be offered the chance to insure the risk at the same rate as the lead insurer, but to an exposure of its choosing, says Nel.
"We are optimistic about their ability to continue growing," he says.
Santam also enjoyed growth in premiums written at its Alternative Risk Transfer (Art) insurance division.
This benefited in part by having Santam Structured Insurance included in the results for the full six months compared with the three months for the corresponding period in 2017.