Cape Town - Santam, South Africa’s largest short-term insurer, said on Wednesday it has unlocked a combined value of R1.1bn for participants in its broad based black economic empowerment scheme.
At its interim results presentation Santam [JSE:SNT] said the unwinding of its Emthunzini B-BBEE scheme, will have a minimal impact on its black ownership.
In the six months to end-June 2015, Santam posted an 11% increase in headline earnings per share, while achieving a return on capital of 24.1% on a rolling 12-month basis.
Cash generated from operations of R1.2bn increased from the R0.9bn reported in the comparative period in 2014, mainly due to the improved underwriting results.
Santam said in a statement its strong underwriting performance, with a net underwriting margin of 8.9% (2014: 7.4%), was influenced by the positive impact of disciplined underwriting actions and a favourable claims environment during the second quarter of 2015.
The insurer posted growth in gross written premiums of 8% (excluding cell captive insurance business).
Santam chief executive Lizé Lambrechts said the improved underwriting results were a consequence of corrective underwriting actions, with specific focus on previously underperforming portfolios.
She said the motor and property classes of Santam’s business delivered substantially improved underwriting results compared to 2014, this despite difficult market conditions.
“The claims environment during the second quarter was relatively benign, but the loss ratio was impacted by the catastrophic hail event in Pietermaritzburg in February 2015, as well as a number of large property losses in the first quarter of 2015.
"Load shedding has not yet had an impact on our claims experience – the view across the industry is that South Africans seem to have adapted to what has now become part of daily life for both individuals and business owners.”
MiWay, Santam’s direct insurance business, achieved growth in gross written premiums of 17% and an underwriting profit of R76m, compared with R52m in the 2014 comparative period.
The crop insurance business, however, showed significant lower underwriting profit of R53m compared with R187m in the 2014 comparative period, due to severe drought conditions.
Looking ahead, Lambrechts said trading conditions in the South African insurance industry remain highly competitive in a low-growth economic environment.
The rand has weakened significantly against the US dollar since January 2015, which is expected to impact negatively on motor claims costs.
She said Santam would continue to focus on the optimisation of the claims and procurement value chains to increase efficiency and counter the impact of the weakening rand, while intensifying its focus on cost efficiencies to improve the management expense ratio over the medium term.
Santam declared an interim dividend of 288c a share share, up 10% on 2014.