Santam pays out record R24.5bn in claims

Return to dividend payments shows ‘strong confidence in our solvency’: CEO Lizé Lambrechts.

FIFI PETERS: Another set of results – actually, the first set of results for today coming out of the insurance sector. That is Santam today reporting that it paid out claims of over R24 billion in the past year, but that it also saw a significant amount of new business coming in with its gross written premiums up 10% over the period. We have Santam CEO Lizé Lambrechts on the Market Update to explain the numbers.

Lizé, thanks so much for your time. I imagine that the record claims that you paid out during the period weren’t all related to Covid-19. Can you give us a sense of exactly what you were paying out claims for?

LIZé LAMBRECHTS: Thanks, Fifi. You must understand we pay lots and lots of claims every year anyway, and a lot of these would be the normal claims that we pay – motor claims, normal property claims, someone who loses his cellphone, all of that. But additionally this year we paid quite a bit of contingent business-interruption claims.

And then we had very bad weather events in the fourth quarter which actually caused quite significant crop claims. In December alone we paid over R600 million of crop claims, then also motor experience really normalising to what we would expect in normal years – and even worsening because of the bad weather experienced in the fourth quarter.

FIFI PETERS: All right. But just on the contingent business-interruption claims, I see your statement guides that you paid over R2 billion in this period. I recall at some time there were around 3 200 total claims that needed to be processed by yourselves. Can you just let us know how much has been settled so far, and what is still outstanding?

LIZé LAMBRECHTS: Yes, we have processed either final payments or at least interim payments to more than 70% of our claims. In the other 30%, we are still waiting for documentation from our clients in terms of their claims formulation.

FIFI PETERS: All right. Just a bit of detail there? What kind of documentation?

LIZé LAMBRECHTS: They need to give us information about their income before Covid, and then what their losses were. So they need to formulate what they think the claim is that they can put in for contingent business-interruption.

FIFI PETERS: All right. But the point you’re trying to make is that the majority of claims, when it relates to contingent business-interruption, have been settled.

LIZé LAMBRECHTS: Absolutely. We continue to settle as quickly as we can. As soon as we get the information we process the claim.

FIFI PETERS: Lizé, of course the year that was, 2021, also included the riots in July – that was also an unprecedented event that took a lot of people by surprise. Any exposure there, or any claims that were paid out in relation to the riots?

LIZé LAMBRECHTS: Fifi, we don’t have direct exposure financially to the riots. That is covered by Sasria, the state insurer, although we did help them with processing the claims. We did have some exposure, though, through our reinsurance company, Santam Re, which acted as a reinsurer to Sasria to the tune of net, I think, R235 million that we provided for that.

FIFI PETERS: Okay. But nothing material for the group?

LIZé LAMBRECHTS: No, that’s big enough, but it’s not material.

FIFI PETERS: We are talking billions here, so when you compare that to millions it kind of seems like a drop in the ocean for your balance sheet. But I hear the point that you’re trying to make, Lizé.

LIZé LAMBRECHTS: Hundreds of millions.

FIFI PETERS: Okay. Point taken, I can see. But I want to talk to you about the share price, because your share price has flown on the JSE today. At one point it was up over 12%. It hasn’t quite closed at those levels, but 8% is still something that is quite significant.

It’s probably in response to the fact that you’re paying dividends again, and you’ve been paying a special dividend.

But I’d like to ask you whether this is a signal from the group that you are confident that the worst of the Covid-19 effects are behind you.

LIZé LAMBRECHTS: I think there is a strong signal for the market in terms of our confidence in our solvency – the fact that we are very happy to pay a resumed dividend payment, and then also the special dividend. But also, as you say, confidence in the future of the industry and the future of Santam.

FIFI PETERS: In this future where are you seeing growth coming from?

LIZé LAMBRECHTS: We see growth coming, I think, from all our business lines. Of course we expect significant growth from our international business, particularly in Africa – in partnership with Sanlam in Africa. We’ve done well and we think we will continue to do well.

But here in South Africa we really believe that our direct insurance company, MiWay, will continue to show exceptional growth. I think we’ve also got many plans, many building blocks in place to also grow our intermediated business here in South Africa.

FIFI PETERS: Lizé, I can’t allow you to leave without asking about the Russia/Ukraine story. I know it’s fairly removed from us here in Africa, but were there any of your clients exposed to the story, either indirectly or directly, and does this present a risk for you going forward?

LIZé LAMBRECHTS: We have very, very small exposure through our international business, but that is really immaterial for Santam, so it’s really not something that we worry about at the moment. I think we are more worried about the impact on the economy in general, the inflationary pressure, the increase in oil [prices], and potentially again bottlenecks in terms of supply chains.

FIFI PETERS: All right. Lizé, we’ll leave it there for now. Thanks so much for your time. Lizé Lambrechts is the CEO of Santam.

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