Wrap Text
Operational Update for the three months ended 31 March 2025
SANTAM LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06
LEI: 37890092DC55C7D94B35
JSE Share Code: SNT & ISIN: ZAE000093779
A2X Share Code: SNT
NSX Share Code: SNM
Bond company code: BISAN
("Santam" or "the Group")
OPERATIONAL UPDATE FOR THE THREE MONTHS ENDED 31 MARCH 2025
This is a general communication to Santam shareholders and noteholders (collectively the
"Security holders") covering the operational performance of the Group for the three months
ended 31 March 2025 (the "period"). Unless the context indicates otherwise, references to
the comparable period are to the three months ended 31 March 2024.
The Group delivered a strong performance during the period, exceeding the longer-term
targets for all key financial performance indicators. Particularly pleasing were double-digit
growth in gross written premiums, an underwriting margin above the upper end of the 5% to
10% target range and annualised return on capital in excess of 30%.
The operating environment in South Africa, our dominant market, remained challenging. Low
economic growth and pressure on personal disposable income continued to dampen growth
prospects, aggravated by the persistent deployment of insurance capacity in specific lines of
specialist business at unsustainable rates. Emerging global geopolitical tensions suppressed
business and consumer confidence.
However, the Group's FutureFit 2030 strategy is geared towards operating under challenging
conditions, laying a foundation for operational resilience that supports the financial
performance and value creation for all stakeholders. Our diversification across market
segments, insurance classes and geographical reach continues to stand us in good stead.
The various underwriting actions implemented over the past two years continue to bear
positive results, including in the property book, which delivered good underwriting results
within the 5% to 10% target range.
Conventional insurance business
The conventional insurance business achieved gross written premium growth of 11%, with
solid contributions from all businesses. Highlights include double-digit growth at MiWay, the
combination of excellent growth in business insurance and continued acceleration in
personal lines new business. Santam Re also achieved strong double-digit growth,
supported by whole-account quota share business from strategic partnerships. Within
Specialist Solutions, casualty lines achieved muted growth amid aggressive pricing, and Agri
business volumes declined due to inherent timing differences early in the year. Net earned
premium growth of 17% exceeded growth at a gross level due to timing differences, which is
expected to normalise over the year with full-year growth in NEP to be closer aligned to
GWP.
The underwriting performance for the period benefited from the various underwriting actions
implemented over the past two years, which improved the underlying rating strength and
profitability of the in-force book. Favourable attritional loss experience and an absence of
significant loss events year-to-date also contributed. The overall Group underwriting margin
for the period exceeded the 5% to 10% target range, a substantial improvement on the
comparable period.
Favourable interest-rate market returns and an outperformance of benchmarks by the
Group's investment managers supported investment return earned on insurance funds,
which amounted to 2.5% of net earned premium, slightly exceeding the comparable period.
Alternative Risk Transfer ("ART") business
The ART business segment reported excellent operating results, with solid growth in fee
income, underwriting results and investment margins.
Shareholder investment returns
The investment return earned on the Group's capital portfolios was below expectations and
that of the comparable period. This was mainly due to foreign currency translation losses on
the foreign exposure in the portfolio following a strengthening of the Rand since 31
December 2024.
Capital position
The Group's economic capital cover ratio remained well within the 145% to 165% target
range following the final dividend payment in March 2025.
Prospects
Global markets were gripped by a sharp increase in geopolitical and economic risk since the
end of the first quarter, fuelled by a substantial increase in import tariffs by the United States,
which was met by reciprocal responses. Volatility indices rose as markets tried to price for
the potential second-order effects on global trade, economic growth and inflation.
Santam's balance sheet remains resilient and weathered the investment market volatility
during April very well, given the Group's conservative investment philosophy.
However, the current global political tensions enhance the risk of supply chain disruptions,
which, together with a weaker Rand exchange rate, can contribute to higher claims inflation
and a commensurate negative impact on underwriting results. Under these conditions,
general inflation will likely rise in South Africa, eroding consumer disposable income and
growth conditions. We monitor conditions as they unfold but take proactive measures to
mitigate against the potential headwinds. These include increased focus on diligent expense
management and accelerating strategic growth initiatives through our direct and partnership
channels in South Africa and our international growth pillar. The recent finalisation of the
MultiChoice transaction adds a substantial customer base to the Group, further enhancing
growth potential.
The Group did not experience any notable claims from the recent wildfires in Cape Town.
The conventional insurance underwriting performance for the remainder of the year remains
susceptible to adverse weather-related and other significant loss experience. Investment
market performance is also expected to remain volatile and uncertain, potentially impacting
the investment return earned on insurance funds and the shareholder capital portfolio. The
strong financial performance in the second half of the 2024 financial year furthermore sets a
high comparative base. These, together with the potential second-order effects of
geopolitical tension on inflation and disposable income, may impact earnings growth for the
full year.
Global reinsurance rates continue to soften with the Group realising improved pricing for its 1
January 2025 renewals.
The strength of our client and intermediary relationships and a superior distribution footprint
positions us well to maintain a solid financial performance as we head into an uncertain
operational environment. Profitable growth remains a key focus area for all businesses.
The financial information included in this announcement has not been reviewed or reported
on by Santam's external auditors.
Shareholders and noteholders are further advised that Santam's results for the six months
ending 30 June 2025 are expected to be released on SENS on or about 1 September 2025.
13 May 2025
Equity and Debt Sponsor: Investec Bank Limited
Date: 13-05-2025 04:00:00
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