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Operational Update for the nine months ended 30 September 2024
SANTAM LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06
LEI: 37890092DC55C7D94B35
JSE Share Code: SNT & ISIN: ZAE000093779
A2X Share Code: SNT
NSX Share Code: SNM
Bond company code: BISAN
("Santam" or "the Group")
OPERATIONAL UPDATE FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2024
This is a general communication to Santam shareholders and noteholders (collectively the "Security
holders") covering the operational performance of the Group for the nine months ended 30 September
2024 (the "period").
Despite a challenging operating environment, the Group delivered a solid performance during the period,
with an underwriting result within the 5% to 10% target range. The Group's underwriting performance
benefited from an improvement in attritional loss experience as the various underwriting actions
implemented over the past 18 months continue to bear positive results. Good progress has been made
with implementing additional underwriting actions to address the underperformance of the property book.
Weak economic growth in South Africa, our primary market, was not conducive to short-term growth.
Competitive pressure in specialist lines of business persisted, with international capacity being deployed
at unsustainable rates. Inclement weather conditions in July 2024 resulted in sizable flooding losses, which
added to the adverse experience in the first half of the year.
Despite the challenges in the operating environment, the Group demonstrated operational resilience and
achieved good growth in gross written premiums, net insurance results and net income after tax. The
Group's diversification across market segments, insurance classes and geographical reach continues to
stand it in good stead.
Conventional insurance business
The conventional insurance business achieved net earned premium growth of 8%, with solid contributions
from all major businesses except for Santam Re and Santam Specialist Solutions. This was mainly due to
timing differences in recognising unearned premiums at Santam Re and competitive conditions impacting
Santam Specialist Solutions, as noted above.
Gross written premium also increased by 8%, with solid growth across all major insurance classes. The
exceptions were motor and crop. Within motor, a decline at Santam Re following its portfolio restructuring
and flat volumes at Santam Specialist Solutions offset good growth in other business units. Crop insurance
was impacted by weather conditions that delayed and, in some instances, prevented planting. Liability was
impacted by the highly competitive market pricing, where we chose not to follow unsustainable terms. The
Group, however, continued to achieve overall strong growth in liability due to the portfolio restructuring at
Santam Re.
The Santam Client Solutions and Broker Solutions businesses achieved good growth in gross written
premium and net earned premium. The premium-related actions taken in response to high claims inflation
and frequency are being realised, with lapse rates improving over the period.
New business written through the MTN partnership in Santam Partner Solutions showed good traction with
the device insurance strategy.
The Santam Specialist Solutions business recorded muted growth in gross written and net earned
premiums, reflecting the pressures on the liability and crop insurance classes.
The improvement in growth trends at MiWay persisted. Business insurance and value-added services
products achieved particularly robust growth. The roll-out of MiWay's new inbound and tied agency strategic
growth initiatives shows positive results.
Santam Re recorded double-digit growth in gross written premiums during the period.
Conventional insurance underwriting results were impacted by weather-related and significant losses of
some R960 million net of reinsurance year-to-date. The Western Cape floods in July 2024 added R133
million to the adverse weather-related claims experience. This was offset by better-than-expected attritional
loss ratios at Santam Broker Solutions, Santam Client Solutions and MiWay, and a decline in claims
frequency at Santam Specialist Solutions. The overall Group underwriting margin for the period remained
within the 5% to 10% target range, improving on the result for the first half of 2024.
Favourable interest-rate markets and positive investment manager performance supported the investment
return earned on insurance funds, which improved compared to the first half of 2024.
Alternative Risk Transfer ("ART") business
The ART business segment reported strong operating results, with excellent growth in fee income,
underwriting results and investment margins when compared to 2023.
Shareholder investment performance
The investment return earned on the Group's capital portfolios exceeded expectations. This was mainly
due to higher returns on interest-bearing investments and the revaluation of the investment in Shriram
General Insurance, partly offset by foreign currency translation losses following the strengthening of the
Rand against the US Dollar since 31 December 2023.
Capital position
The Group's economic capital remained within the 145% to 165% target cover range
following the interim dividend payment in September 2024.
Prospects
We launched a refreshed Santam brand positioning in the third quarter of 2024 in support of the Group's
FutureFit growth strategy. The new brand positioning was well received by the market. With the strength of
our client and intermediary relationships and a superior distribution footprint, we are well-positioned to
maintain our topline growth trajectory. Profitable growth remains a key focus area for all businesses to
ensure we meet our gross written premium growth target of 1% to 2% above nominal economic growth.
The unwinding of timing differences in recognising unearned premium reserves should support growth in
net earned premiums towards the end of the year.
We implemented various actions to address the underperformance in the property book. These include
improving the underlying rate strength, increasing excess amounts, better risk selection through geo-coding
roll-out, strengthening our surveying capacity and targeted utilisation of reinsurance. These actions show
positive results and are expected to continue benefiting underwriting results into 2025 as the property book
progresses through the renewal cycle. Managing claims inflation, in particular in the motor book, remains
a key focus area to ensure the long-term sustainability and affordability of premiums to the benefit of all
stakeholders in the general insurance value chain.
The conventional insurance underwriting performance for the remainder of the year remains susceptible to
higher-than-expected adverse weather- and fire-related experience. In addition, investment market volatility
could potentially impact the investment return earned on insurance funds and the shareholder capital
portfolio. These may have an impact on earnings growth for the full year.
We believe our solid foundation and steadfast implementation of the refreshed FutureFit strategy will enable
us to maintain our track record of delivering superior results.
The financial information included in this announcement has not been reviewed or
reported on by Santam's external auditors.
Shareholders and noteholders are further advised that Santam's results for the year ending 31 December
2024 are expected to be released on SENS on or about 27 February 2025.
12 November 2024
Equity Sponsor: Investec Bank Limited
Debt Sponsor: FirstRand Bank Limited
Date: 12-11-2024 12:00:00
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