Santam pays record R24bn in claims

Santam, the insurance and financial services group, has made headlines by paying a record R24.5 billion in claims for the financial year, more than doubling its headline earnings per share. The company also declared a final dividend of 790c, showcasing a strong performance despite the challenges faced in the past year. The core of Santam's payout record for the period was agriculture and business interruption claims, highlighting the impact of these sectors on the company's operations. Santam's CFO, Hennie Nel, sat down with CNBC Africa to delve deeper into the factors behind the impressive results. Nel explained that the company's stellar performance and the decision to issue a special dividend were a result of various factors coming together. One significant aspect was the resolution of contingent business interruption (CBI) claims, providing more certainty around the financial position. In 2020, due to the uncertainty surrounding CBI claims, Santam refrained from declaring interim or final dividends, leading to a buildup of capital within the business. With progress in settling CBI exposures and a strong overall performance, Santam was able to maintain a robust underwriting margin and adjust its capital levels accordingly by issuing a special dividend. The improvement in Santam's underwriting profit margin, which rose to 4% from 2.5% in the previous year, showcased the company's ability to navigate challenges and deliver strong results. Nel attributed this success to a more normalized year in 2021 compared to the difficult conditions experienced in 2020. Factors such as increased traffic patterns, higher claims related to normal business activities, and significant weather events in the fourth quarter contributed to the company's performance. Despite the challenges, Santam managed to achieve impressive results, surpassing the target underwriting margin range of 4-8%. Looking ahead, Santam remains cautiously optimistic about the current economic environment but acknowledges areas of concern. One key area of focus is economic growth in South Africa, as the insurance industry is closely tied to the overall growth of the economy. Infrastructure challenges also pose a significant hurdle, impacting operations and the business environment. However, Santam is actively exploring new partnerships and opportunities to expand its business, including a focus on growing its specialist and reinsurance businesses across the African continent. When it comes to Africa, Santam sees promising opportunities in countries with lower insurance penetration rates such as Ghana, Ivory Coast, and Morocco in Western Africa, as well as Angola in Southern Africa. The company's strategy involves partnering with local entities to leverage their market expertise while bringing technical insurance knowledge to the table. This collaborative approach allows Santam to navigate the complexities of different markets and drive growth effectively. In the context of government efforts to attract investment into the country, Santam has noted the importance of infrastructure developments and the release of capital for economic progress. While there have been some positive developments, the company highlights the need for sustained efforts to stimulate growth and create a solid foundation for future expansion. Santam remains committed to engaging with opportunities for consolidation in the market, especially in challenging environments where scale can provide a competitive advantage. As Santam continues to navigate the evolving business landscape and expand its footprint in Africa, the company is poised for growth while remaining vigilant about potential risks and uncertainties. With a focus on sustainable growth and strategic partnerships, Santam is positioned to capitalize on emerging opportunities and drive value for its stakeholders.