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International diversification pays off for Santam

A ‘solid set’ of interims; crop insurance impacted by heavy hail claims, says CEO Lizé Lambrechts.

DUDU RAMELA: South Africa’s largest short-term insurer, Santam, released their [interim] results today [Thursday], reporting an 8% growth in gross written premiums for conventional insurance. Headline earnings per share fell 3%.

Let’s get more on this now. I’m joined on the line by Ms Lizé Lamprechts, Santam Group CEO. A very good evening to you, and thanks so much for joining us.

LIZÉ LAMBRECHTS: Sure, thank you. My pleasure.

DUDU RAMELA: How would you characterise the results?

LIZÉ LAMBRECHTS: I think it’s really a solid set of results in the current economic climate in South Africa, and we are very pleased with the results.

DUDU RAMELA: Let’s look at the Santam specialist business, namely the property class and motor class, which grew by 3%.

LIZÉ LAMBRECHTS: Our motor class actually grew by 3%. We are quite impressed with the growth in our specialist business – actually in excess of 10%. The motor class is under pressure. We are seeing fewer and fewer new cars being bought in South Africa, and you would expect that to be under pressure in a difficult economy.

DUDU RAMELA: How did large claim losses in the corporate property and marine business impact the Santam specialist business?

LIZÉ LAMBRECHTS: Any large claim – it doesn’t really matter where it comes from – would impact us in terms of our underwriting profit. We do, however, have reinsurance for these large claims, so we take the knock up to a certain limit, and after that our reinsurers help us pay the claim.

DUDU RAMELA: What of the crop insurance business?

LIZÉ LAMBRECHTS: Crop insurance had a very difficult year, and we were expecting some punch there. Yes, there are lots of either drought or hail-related claims. This year we had a lot of hail claims, and therefore we actually showed a loss in our crop business during the period. But that is why farmers take out insurance, and that is why we are there for them when they need us.

DUDU RAMELA: Your direct insurance business, MiWay, saw a 9% growth in gross written premiums. What do you put that down to?

LIZÉ LAMBRECHTS: MiWay is a still a fairly young company in the Santam Group, and that brand is doing phenomenally well – the brand and the company. They are still growing; they are still selling insurance to new entrants to the market, and are managing to get business from other direct insurers as well.

DUDU RAMELA: Your outside South Africa business – what was the performance there?

LIZÉ LAMBRECHTS: We did very well outside South Africa. We grew our gross return premium 21%. Some of the growth was actually because of the deterioration in the South African currency, but we are pleased with the growth there. It speaks to our strategy of international diversification.

DUDU RAMELA: And you’ve established a pan-African specialist insurance business with Saham Finances. Are you able to share progress on that front with us?

LIZÉ LAMBRECHTS: Yes. We are currently building almost a new business, a joint venture with Sanlam and Saham Finances in Pan Africa. We are very excited about the prospects of the business. For us this year really is about building the foundation, ensuring that we have a meeting of minds around the markets that we want to target and the risk appetite. But we are confident that from next year we will still see solid results from this business.

DUDU RAMELA: Your outlook for the rest of the year?

LIZÉ LAMBRECHTS: The outlook for the rest of the year will be very much weather-dependent in terms of underwriting. The first quarter in Gauteng normally is hail season, so we are a little in the hands of the weather, but we are very confident that our underwriting practices are still solid. Growth will be difficult in South Africa; the economy is difficult. But we fully expect to see a continuance of the growth internationally. So, I think we’ll do well compared to other businesses in terms of growth. Short-term insurance is volatile.

DUDU RAMELA: What of the Santam commercial and personal intermediated business? Did it perform according to your expectations?

LIZÉ LAMBRECHTS: Yes, it did. It’s a business that’s really battling most in terms of growth, because you will know that your ordinary individual that we sell short-term insurance to in South Africa is under a lot of financial pressure. Particularly in the small business segment we see cancellations because businesses are not making it. It is under pressure from a growth viewpoint, but we are comfortable with what they are doing. From a profit viewpoint, [we are] very comfortable with the performance there.

DUDU RAMELA: Thank you very much for your time this evening, Ms Lambrechts.

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