Santam hit by Covid-19 claims

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Santam hit by Covid-19 claims

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Published Date: 2021-03-05 | Source: Stephen Gunnion | Author: Stephen Gunnion

Santam hit by Covid-19 claims

The short-term insurer is not paying a final dividend after earnings tumbled as a result of Covid-19.

Santam has reported 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. However, it says the claims environment was otherwise benign last year, with limited natural catastrophes and lower motor claims due to the lockdown.

Releasing results for the year to end-December, the short-term insurer said contingent Business Interruption (CBI) claims relating to Covid-19 had a significant adverse impact on its underwriting results for the year. In January, it 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.

After settling R21.1 billion in gross claims for 2020, up from R18.9 billion in 2019, it said in January it would start assessing and settling valid claims for policies with CBI extensions.

Gross written premiums for the year rose 7% to R38.3 billion and conventional insurance gross written premiums increased by 5% to R31.1 billion, despite the constrained economic climate. Net investment income attributable to shareholders, inclusive of the investment return on insurance funds, fell by 26% to R1.03 billion. It said the lower interest rate environment and fair value losses on financial assets were key contributors to the weaker performance. Its underwriting margin declined to 2.5%, below its long-term target range of 4% to 8% of net earned premiums.

Basic earnings per share (EPS) declined by 75% to 491c and headline EPS fell 47% to 1,100c, as a result of lower operating results and reduced investment income attributable to shareholders. It hasn't declared an interim dividend.

Santam said trading conditions remained very competitive in a constrained growth environment and it expected economic activity to be significantly under pressure in the short to medium term. Investment markets were also likely to remain uncertain and volatile.

Santam's shares rose 4.3% to R259.03 yesterday.





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