Santam poised for upswing

Johannesburg - The financial and economic crisis may be creating challenges for many businesses, but opportunities are also beginning to emerge, said Santam CEO Ian Kirk. He added that as much as 30% of the company's business could be generated from offshore.

"In five years' time, if 70% of our revenue came from South Africa and the rest from emerging markets, I'd be happy," said Kirk.

Kirk was commenting soon after Santam was named leading insurer in the three short-term insurance categories at the Financial Intermediaries Association (FIA) of Southern Africa.

Kirk added that the economic crisis might be nearing its end. "It may be a difficult time, but it does create an opportunity and things happen in this environment," said Kirk in an interview.

When asked where he thought South Africa was in the economic cycle, Kirk said: "We could be sliding a bit more but I don't think there is a long way to go."

Commercial business 'solid'

Kirk said that personal insurance shopping lines had taken strain, but some customers had opted for direct insurance instead of through a broker. Santam's commercial business, however, had remained "solid", he said.

"In some segments of personal lines, there is shopping down [lowering the value of insured goods] due to pressure on disposable income," he said. The frequency and cost of claims were increasing, he added.

Apart from an emphasis on the commercial business - which Kirk said was still broker-driven - Santam was focused on high net worth individuals, a segment with insurance needs that were wider than those of lower- and middle-income earners, and on customers faithful to the personal touch of the broker.

The crisis was affecting smaller brokers the most, therefore Santam would be working hard with its broker network to better assess the risk of current conditions. "The big issue for us is to get the correct rate of the risk and work with the corporates to get the correct coverage."

Emerging markets beckon

Investors have been cautiously watching how Santam would pursue growth following its misfortunes in 2007 when the group's offshore business suffered an after-tax loss of R168m, a development that triggered it quitting Europe.

Kirk said that Santam would be looking at some acquisitions opportunities but described the strategy as "slow and measured". According to Kirk, its acquisitions in South Africa would be smaller "bolt-on" type businesses for fear of falling foul of competition law.

A drive to build Sanlam's footprint in emerging markets, such as India and Africa, would be the primary source of growth.

- Fin24.com