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Operational Update to Securityholders following the Santam board meeting held on 30 November 2022
SANTAM LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06
JSE Share Code: SNT & ISIN: ZAE000093779
A2X Share Code: SNT
NSX Share Code: SNM
Bond company code: BISAN
(“Santam” or the “Company” or the “Group”)
OPERATIONAL UPDATE TO SECURITYHOLDERS FOLLOWING THE SANTAM BOARD
MEETING HELD ON 30 NOVEMBER 2022
This is a general communication to Santam shareholders and noteholders (‘Securityholders’)
on the business performance of the Santam Group for the 10 months ended 31 October 2022
(the ‘period’).
Conventional Insurance business
The Conventional Insurance business achieved strong gross written premium growth of 8%.
The underwriting environment continues to be characterised by high claims inflation, electrical
power surges and crime-related claims. In addition, the adverse weather conditions and
devastating floods in the KwaZulu-Natal province experienced during the earlier part of the
year, partly offset by a reduction in the COVID-19 related contingent business interruption
(CBI) claims provision, resulted in the net underwriting margin for the period remaining below
the bottom end of the target range of 5% to 10%. Good progress has been made in
implementing underwriting actions to address the high claims ratios, resulting in improved
underwriting results since June 2022. The positive impact of the underwriting actions, which
include procurement efficiencies, segmented premium increases, and higher claim excesses,
will continue into 2023.
The process of finalising the remaining CBI claims and associated reinsurance recoveries
relating to the COVID-19 lockdown continued steadily. No adjustment was made to the
outstanding CBI claims provisions since June 2022 and it will be reviewed again at year-end.
The Santam Commercial and Personal (C&P) business achieved acceptable growth in gross
written premiums, whilst the underwriting actions to address the increase in claims frequency
and claims inflation started to gain traction.
The Santam Specialist business recorded excellent growth in gross written premiums in the
four months since June 2022. Significantly improved underwriting results were achieved with
the liability, engineering, crop and travel insurance businesses being the main contributors.
MiWay continued to achieve subdued gross written premium growth. An improvement in the
claims’ ratio was achieved since June 2022, following the positive impact of underwriting
actions. MiWay management is maintaining a strong focus on growth initiatives.
Santam Re reported steady gross written premium growth following a general increase in
reinsurance rates globally. Underwriting results were negatively impacted by increased claims
activity and large losses during the reporting period.
The investment return on insurance funds remained volatile. However, it improved significantly
compared to the June 2022 performance and the actions taken to reduce volatility had a
positive impact since the interim results.
Alternative Risk Transfer (“ART”) business
The ART business segment reported strong operating results with very good growth in fee
income.
Sanlam Emerging Market (‘SEM) partner businesses
On 4 May 2022, Santam announced that it entered into an agreement with Allianz Europe BV
(Allianz), in terms of which Santam will dispose of its 10% interest in SAN JV to Allianz. The
regulatory approvals for the proposed disposal are progressing according to plan and remain
on track to complete by mid-2023.
In India, Shriram General Insurance (SGI) was impacted by lower sales through Shriram
channels as well as lower prescribed premium increases on SGIs’ third-party portfolio relative
to the historical average. Increased management focus on cross-sell has begun to support
improved sales trends in SGI. The net insurance result increased marginally compared to the
prior period due to improved claims experience and higher investment return on insurance
funds.
Investment performance
The weakening of the Rand against the US Dollar since 30 June 2022 resulted in significant
foreign currency gains on shareholder investments, whilst the bond market remained volatile.
On 30 June 2022, the Group entered into a zero-cost collar over listed equities to the value of
R1.4 billion, based on the SWIX 40, to provide capital protection under the continued volatile
market conditions and the below target underwriting results. The structure offers full downside
protection from the implementation level of 11 789, with upside participation (excluding
dividends) of 0.78% and it expires on 15 December 2022.
Capital
The Santam Group’s economic and regulatory capital position remained strong following the
interim dividend payment in September 2022. The economic capital coverage ratio on 31
October 2022 exceeded the mid-point of the 145% to 165% capital target band.
Prospects
The Group has concluded a strategy refresh process to ensure our FutureFit strategy remains
optimal in the current and medium-term environment. Santam is the market leader in South
Africa. Our customers’ needs, behaviours, and technologies are constantly evolving so it is
crucial that we adjust our operating model to meet the needs of both our current clients and
new client segments. We will aim to acquire and understand our customers through the
enhanced use of data and connect with them through a shift to a focused multi-channel
approach complemented with ecosystem adjacencies and partnerships at scale.
In order to achieve this, the C&P multi-channel business will be restructured into three
business units to focus on the distribution channels where we interact directly with clients
through brokers and partnerships. The other customer-facing businesses - MiWay, Santam
Specialist and Santam Re will continue to provide growth and diversification benefits. Our
operating model shift will also see us managing our shared services in a more coordinated
manner to further enhance efficiency and delivery to our customer-facing business units. Our
operating model changes take effect from 1 January 2023.
We will continue to grow our international strategy off the back of our tested competencies in
specialist and reinsurance businesses.
Our net underwriting margin target of 5% to 10% and our return on capital target of 24% remain
valid. The pivot in our strategy aims to ensure delivery against these targets in a changing
environment.
Financial results
This update is based on the 10 months up to October 2022. The results for the remainder of
the year remain susceptible to the inherent volatility of underwriting and investment activities.
The financial information included in this announcement has not been reviewed or reported
on by Santam’s external auditors. Santam’s results for the year ending 31 December 2022
are expected to be released on SENS on or about 2 March 2023.
Investor Conference call
A conference call for analysts and investors will take place at 16h00 (South African time) today
(30 November 2022). Investors and analysts who wish to participate in the conference call
should register as indicated below:
Please register at: https://www.diamondpass.net/7790894 for the call.
Registered participants will receive their dial-in number upon registration. We advise
participants to register and dial in 5-10 minutes before the commencement of the conference
call at 16h00. For assistance, please contact Gloria Tapon Njamo: Santam Investor Relations
at +27 21 915 8228.
30 November 2022
Equity Sponsor: Investec Bank Limited
Debt Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 30-11-2022 02:41:00
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