Picture: SANTAM
Picture: SANTAM

Santam, the country’s largest short-term insurer whose profits for 2019 have already been compromised by a spike in weather-related claims in the first half, says the stagnant economy is now adding to its challenges.

The insurer, which is owned by Sanlam, said in the 10-month period to end-October its commercial and personal insurance business continued to experience “a strain” in increasing its gross written premiums.

The Commercial and Personal intermediated business had achieved below inflation growth in the first six months of 2019 and the insurer’s overall premium income was boosted by other units including MiWay, the specialist insurance business, and growth from outside SA.

Santam said the group as a whole achieved “acceptable growth” in the period but more details were expected when the insurer reports full-year results in March 2020.

Santam joins other SA companies in pointing out that economic growth, which stood at just 0.8% in 2018 and is forecast to grow by only 0.5% in 2019, is not conducive to grow profits.

On the positive side, Santam said its net underwriting margin — the profit it makes after paying claims and business expenses — had improved to “well above” its midpoint of the target range of 4%-8%. The company saw its underwriting profit squeezed by higher weather-related claims in the first half of the year.  

A “benign claims environment” since the company reported its interim financial performance in June helped, it said in the trading update.

The businesses that demonstrated resilience in the first half, namely the Santam Specialist business, MiWay and reinsurance unit Santam Re, continued to deliver good underwriting performance after June.

Santam’s full-year performance will likely benefit from stable investment returns the insurer recorded in the first 10 months of the year, contingent on whether the inherently volatile underwriting and investment environment in which it operates does not change for the worse.

buthelezil@businesslive.co.za