NZINGA QUNTA: My title is Nzinga Qunta, standing in for Fifi Peters. Santam is a South African monetary providers group. It additionally has pursuits throughout our continent in areas together with Malawi, Tanzania, Zimbabwe, Zambia and Uganda. Santam has come out with its outcomes [for the half-year to June 2022] and CEO Tava Madzinga joins me now.
An excellent night to you. Thanks a lot to your time on the Market Update this night. The first half of the yr was described – and I’m quoting instantly right here – as ‘one of the most challenging underwriting periods in Santam’s historical past’. Why?
TAVA MADZINGA: Good night, Nzinga, and good night listeners. We’ve seen a really robust H1, 2022. I’ll characterise it as an ideal storm of climate, funding volatility, financial strain from inflation, and cargo shedding.
We have been in a position to present our purchasers with help, and that was paying an unprecedented R14.2 billion value of claims.
You may virtually put that into three buckets.
The first one is claims that we paid referring to the KZN floods. But it’s additionally vital to say that I feel the actual loss was the tragic lack of life that we noticed in KZN, and the many individuals within the casual sector who don’t have entry to insurance coverage. From a Santam perspective, we noticed our estimates for claims topping R4.4 billion. This is the most important pure disaster that we as an organization have skilled in our historical past. The web impact of that for us was a complete of R566 million. We noticed efficient reinsurance offering sufficient safety in the direction of our backside line.
The second bucket arose from funding volatility. We maintain vital funding in {dollars} for the offshore a part of our enterprise. And so we noticed vital funding volatility within the bond portfolio, and that led to capital losses, though unrealised at this specific cut-off date. So that’s the second bucket, and I feel numerous that [has been] coming by means of – the uncertainty that we’re seeing within the international house, the Ukraine-Russia warfare creating numerous volatility within the funding markets.
And then the final bucket creating strain on our underwriting margin is absolutely the sum complete of poor climate in Q1. I feel you’ll bear in mind it was raining loads. We’ve additionally seen vital will increase in motor [accident] frequency and severity. So we’re going again to regular driving patterns out of Covid.
We are additionally seeing a rise in motorcar theft. Inflation can also be a key issue. And then I feel we’ve all skilled the impression of load shedding once more, power-surge claims additionally coming by means of as a significant contributor. And so I feel the sum complete of that’s vital strain on our underwriting margin. But we’ve additionally seen progress when it comes to our high line.
So our headline earnings once more [have been] coming underneath vital strain. But I feel throughout the board we do count on volatility within the short-term enterprise, and so we’re nonetheless properly inside our danger urge for food and tolerance vary from an earnings viewpoint.
Then we’ve been very snug to nonetheless pay a progressive dividend to our shareholders, even in these robust financial circumstances.
NZINGA QUNTA: Talk to me about how the standard insurance coverage gross-written premiums noticed progress of seven% to over R16 billion.
TAVA MADZINGA: That’s a bit of fine information regardless of the tumultuous H1, the place our enterprise nonetheless did develop by 7% throughout the board. So we noticed good progress coming by means of in our Santam Re enterprise and within the core of our business and private traces enterprise. So regardless of the strain that we’re seeing within the financial system, we’re nonetheless seeing progress in our enterprise.
NZINGA QUNTA: And the choice risk-transfer insurance coverage enterprise – how did that do?
TAVA MADZINGA: Our different risk-transfer enterprise is successfully a enterprise the place we provide bespoke insurance coverage options to a few of our giant prospects. We additionally provide captive cell insurance coverage to massive corporates that look to take or take up among the danger on their very own steadiness sheet. That enterprise carried out very properly so far as we’re involved. We noticed good price revenue from our company purchasers once more coming underneath vital funding pressures, and that to some extent detracted from what was in any other case an extremely stellar efficiency from our different risk-transfer enterprise.
NZINGA QUNTA: We spoke about your companies not simply being based mostly in South Africa. There is Sanlam Emerging Markets basic insurance coverage enterprise, and there’s one thing in India. Talk to us about that.
TAVA MADZINGA: Yes. Across the continent we do associate with the Sanlam Group into the remainder of Africa. And so we write fairly a big quantity of enterprise throughout the continent, a specialist enterprise. That specific enterprise contributes considerably to our Specialist Business. We write, throughout the continent, simply over R1 billion.
And then, if we have a look at our enterprise into India, we do maintain a 15% stake in a high-performing enterprise referred to as Shriram General Insurance. That’s a enterprise that has carried out very, very properly. Despite that efficiency, we did see ourselves diluted as a brand new investor got here into that enterprise. Our stake in that enterprise got here down from 15% to 14.1%. We have obtained the remittances in lieu of that, and we nonetheless proceed to carry that stake.
Then when it comes to simply the SAN JV with Allianz that we noticed Sanlam putting in, we’re exiting that enterprise with the sale of our 10% curiosity stake, however it’s vital to say that we nonetheless retain entry to specialist enterprise throughout the continent, as a result of we do consider, because the continent grows and infrastructure develops, that may proceed to be a key supply of progress for us.
NZINGA QUNTA: Tava, as Santam, what are you hoping for in addition to higher climate within the brief and medium time period?
TAVA MADZINGA: [Laughing] I feel higher climate can be actually most welcome. I feel within the brief run we might want to work with our purchasers and with our intermediaries, simply to maintain a deal with on the inflationary pressures. I feel we’re fairly conscious that our purchasers throughout the board are dealing with vital financial and inflation strain of their disposable revenue. And so it’s in our greatest curiosity to be sure that we’re very measured in how we take into consideration managing inflation, notably in relation to premium charge will increase. And so in that respect we’re taking a look at our consumer portfolios the place we’re viewing their sum insured. We are trying on the excesses.
But on the again finish we work with our suppliers, the unique gear producers, to attempt to dampen the impression of inflation coming by means of to our purchasers. So which means working with the motor body-repair retailers – notably round the place you’ve got motor components, glass – and simply working with them to be sure that we now have a really delicate and empathetic approach to how we cope with premium will increase throughout the board.
NZINGA QUNTA: Tava Madzinga, CEO of Santam, joined us there to debate their outcomes and prospects for the longer term. Thanks a lot to your time.