Santam, South Africa’s largest general insurer, today reported strong underwriting results for the year ended December 2015, with a net underwriting margin of 9.6 per cent. The results were positively impacted by disciplined underwriting actions and a relatively benign claims environment. The group reported gross written premium growth of 8 per cent (excluding cell captive insurance business) in the current low-growth economic environment.
In announcing the results, Santam noted that investment income was positively impacted by foreign exchange gains and solid investment performance in volatile markets. Headline earnings per share increased by 28 per cent, while a return on capital of 32.5 per cent on a rolling 12-month basis was achieved. The solvency margin of 48.1 per cent was higher than the target range of 35 per cent to 45 per cent.
Santam chief executive Lizé Lambrechts said Santam’s underwriting results were achieved in competitive market conditions. “We continue to operate in a tough general economic environment with low GDP growth and a weakening currency.”
Key highlights of Santam’s results to 31 December 2015:
· Growth of 8% in gross written premium (excluding cell captive insurance business)
· Gross written premium from outside SA up to R2.4 billion
· Net underwriting margin of 9.6 per cent compared to 8.7 per cent in 2014
· Paid R14 billion in claims
· Return on capital of 32.5 percent
· Final dividend of 528 cents per share, up 10 per cent
· MiWay gross written premium up 19 percent to R1.8 billion
· Group solvency ratio at 48.1 per cent
· Headline earnings per share of 1 844 cents, 28 per cent above headline earnings reported for prior year
· Cash generated by operations R3.7 billion (compared to R2.4 billion in 2014)
Santam’s focus on international diversification gained momentum with gross written premium from the rest of Africa (excluding Namibia), India, South-East Asia and China of R1.4 billion (2014: R1.1 billion). Santam Namibia reported gross written premium in excess of R1 billion for the second consecutive year, resulting in total gross written premium outside South Africa increasing to R2.4 billion (2014: R2.1 billion).
Looking ahead, Lambrechts said trading conditions in the South African insurance industry remain very competitive in a difficult economic environment. “Real annual GDP slowed to 1.3 per cent for 2015, which equates to low growth of insurable assets for the insurance industry. The Rand depreciated by 25 per cent against the US Dollar during 2015, following the 10 per cent depreciation in 2014, which has an on-going negative impact on the group’s insurance results as it directly affects the claims cost (mainly imported motor parts). We will continue to focus on the optimisation of the claims and procurement value chains to increase efficiency and counter the impact of the weakening Rand.”