Santam earnings hit by Covid-19 claims


Santam earnings hit by Covid-19 claims

Published Date: 2021-02-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Santam earnings hit by Covid-19 claims

The short-term insurer says Contingent Business Interruption claims have had a significant adverse impact on its underwriting results.

Santam will report a big decline in full-year earnings after its underwriting results were impacted by claims from customers whose businesses were impacted by the Covid-19 lockdown.

In a trading statement, the short-term insurance group said headline earnings per share (HEPS) for the year to end-December would be between 42% and 52% lower than the R20.69 reported in 2019 while earnings per share (EPS) were likely to be 70% to 80% below the R19.90 previously reported.

The decrease in HEPS was driven by lower underwriting and investment results, with its net underwriting margin expected to be positive but below its long-term target range of 4% to 8% of net earned premiums. Contingent Business Interruption (CBI) claims relating to Covid-19 had a significant adverse impact on its underwriting results. This was offset to some extent by a benign claims environment which impacted positively on its motor book and the strong performance of its specialist classes of business, notably engineering and agriculture.

Last month, the group increased its net CBI claims provision by R1.7 billion in addition to the R1.3 billion that was raised last June. The increase followed a Western Cape High Court ruling on a case brought against the insurer by Ma-Afrika Hotels and Stellenbosch Kitchen.

Santam said EPS were further impacted by an impairment of its investment in Saham Finances, the pan-African insurer it owns together with parent company Sanlam, with the realisation of the synergies from the acquisition now expected to take longer than initially anticipated due to the slowdown in economic growth across the Saham geographical footprint. It said the full-year impairment was approximately in line with the R690 million impairment it recognised in its half year result to end-June. Impairment charges are excluded from HEPS and only affect EPS.

Santam's results are scheduled for release on 4 March. Its shares rose 1.6% to R261.55 on Friday.

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