“In the six months, the weather has certainly negatively affected us in two main areas: firstly is in the crop insurance business. We had a loss of 112 million rand. We normally would’ve made a profit of 40 to 50 million rand in that period,” Santam CEO Ian Kirk told CNBC Africa.
“We had a most unusual situation where we had hail in the Eastern region in the early months, and then we had drought claims in the centre and in the West of the country in those agricultural areas towards the end of the six month period. The second event was earlier in the year in Limpopo, and we had claims in excess of 100 million, which is over and above what we would’ve expected in a normal period.”
The short-term insurance company had a 5 per cent rise in its dividend to 242 cents, but its underwriting margin was down 1.3 per cent, down significantly from the 6.1 per cent that was reported in the previous comparative period. First half earnings were also down 12.5 per cent.
Santam offers personal, commercial, specialist and agriculture-related insurance, and has assets totalling more than 17 billion rand.
Kirk explained that the general insurance was a volatile market, and that Santam targeted a margin of 5 per cent to 7 per cent over the medium to long term, but was significantly short of the target in the first half of the year.
Their gross written premium for the first half of the year was up 9 per cent. Diluted headline earnings per share were down 12.5 per cent to 3.63 rand.
“There’s a number of things we can do, but at the end of the day, unfortunately it does result in us having to increase rates. We do it selectively but unfortunately that’s part of the recovery process. Given the situation that we’re in, where we’re well below our target, we need to focus more on the profit than on the growth,” said Kirk.
Santam’s holding company, Sanlam Life Insurance Limited, is however forging its path into other African countries, a diversification move that is expected to contribute to Santam’s growth.
“As Sanlam moves forward, we’ll move forward in tandem on the general insurance investments. We also have our corporate and specialist business on the diversification trail, pushing out its borders. Each business has its own priorities, has its own challenges, but the priority is to get back to the target margin,” said Kirk.