Operational update to securityholders
Operational update to securityholders SANTAM LIMITED (Incorporated in the Republic of South Africa) Registration number: 1918/001680/06 JSE Share Code: SNT & ISIN: ZAE000093779 A2X Share Code: SNT NSX Share Code: SNM (‘Santam’ or the ’Company’ or the ‘Santam Group’) OPERATIONAL UPDATE TO SECURITYHOLDERS FOLLOWING THE SANTAM BOARD MEETING HELD ON 2 JUNE 2021 This is a general communication to Santam shareholders and noteholders (‘Securityholders’) on the business performance of the Santam Group for the four- month-period ended 30 April 2021 (the ‘period’). Conventional Insurance business The Conventional Insurance business achieved a net underwriting margin at the lower end of the target range of 4% to 8%, after some large fire claims. Satisfactory gross written premium growth of 7% (4% excluding the premium relief support provided to policyholders in April 2020) was achieved in the current difficult operating environment. Santam was pleased to commence processing valid contingent business interruption (‘CBI’) claims in January 2021, with steady progress made to date on claims where clients have submitted the required documentation. A significant number of clients, who have notified Santam of their claims, are yet to submit their final claim quantification documents and we are communicating and working closely with our clients and intermediaries to ensure the relevant information and documents are submitted in order to settle valid claims expeditiously. We understand that the financial information required to process CBI claims takes time to finalise. Santam’s appeal against the Ma-Afrika judgment (refer to Santam’s JSE Limited Stock Exchange News Service (‘SENS’) announcement “Update on contingent business interruption claims” released on 25 January 2021) with respect to the length of the indemnity period, is expected to be heard by the Supreme Court of Appeal of the Republic of South Africa during the second half of 2021. Given the number of CBI claims finalised during the reporting period, no significant changes were made to the net CBI provision as at 31 December 2020. The Santam Commercial and Personal intermediated business continued to report low growth in gross written premiums, however, various growth initiatives started to show positive results. Solid underwriting results were achieved, following few natural catastrophe claims events during the period. The Santam Specialist business reported satisfactory growth in the liability and engineering businesses, however, negative growth in the travel insurance, transport and corporate property businesses contributed to overall subdued growth in gross written premiums. The underwriting results were negatively impacted by several large fire claims, partly offset by strong performances from the crop and liability businesses. MiWay maintained its positive growth momentum in a tough environment. The underwriting performance was, however, negatively impacted by an increase in the loss ratio. Santam Re continued to report excellent gross written premium growth. Underwriting results were negatively impacted by cautious reserving for international and local losses. The investment return on insurance funds contracted during the period, following the low interest rate environment in South Africa and international markets. Alternative Risk Transfer (‘ART’) business The ART business segment achieved strong operating results with solid growth in fee income and underwriting income. Sanlam Emerging Market (‘SEM’) partner businesses The Sanlam Pan-Africa general insurance portfolio (‘SPA GI’) achieved strong growth in operating results, supported by the recovery in equity markets in North and West Africa, which resulted in positive investment returns on insurance funds, a significant improvement compared to the losses recorded in the first four months of 2020. SPA GI achieved satisfactory growth in gross written premiums in constant currency terms, mainly driven by the performance of Continental Re and the motor and health business lines in Morocco. The improved underwriting performance from SPA GI in 2020 continued into 2021, with the net underwriting margin close to the midpoint of the target range of 5% to 9%. Most countries in the portfolio recorded stable or improved underwriting margins. Shriram General Insurance (‘SGI’) recorded negative growth in gross written premiums. The business was impacted by weaker economic activity and lower sales volumes through the credit businesses as well as no premium increases in 2020 on third-party business, as set by the regulator. The SGI underwriting margin, which has in the past been boosted by reserve releases from claims settlement, was weaker over the period. Courts in India, where many claims resolutions happen, remain closed, which impacted the ability to finalise claims. SGI reserves prudently under these conditions, due to the uncertainty. SGI continued to achieve good investment returns on insurance funds, in line with 2020. Investment performance The Santam Group’s investment portfolio continued to be negatively impacted by the lower interest rate environment and the impact of the stronger Rand on foreign currency investments. On 3 February 2021, the Santam Group renewed its zero-cost collar over listed equities to the value of R1 billion, based on the SWIX 40, to provide continued capital protection. The structure expired on 3 May 2021 and was rolled over for a further three-month period. During April 2021, Santam increased its stake in Mirabilis Engineering Underwriting Managers by acquiring the remaining 45% shareholding for R176 million, making it a wholly-owned subsidiary of Santam. On 12 April 2021, the Santam Group redeemed the R500 million floating rate subordinated debt which became callable during the month. The economic capital coverage ratio as at 30 April 2021, was well above the midpoint of the target range of 150% to 170%. The financial information included in this announcement has not been reviewed or reported on by Santam’s external auditors. The next set of Santam results will be for the six months to 30 June 2021, which are expected to be released on SENS on or about 2 September 2021. Investor Conference call A conference call for analysts and investors will take place at 16h30 (South African time) today (2 June 2021). Investors and analysts who wish to participate in the conference call should register as indicated below: Please register at: https://www.diamondpass.net/7215168 for the call. Registered participants will receive their dial-in number upon registration. We advise participants to register and dial in 5-10 minutes prior to the commencement of the conference call at 16h30. For assistance, please contact Gloria Tapon Njamo: Santam Investor Relations at +27 21 915 8228 2 June 2021 Equity Sponsor: Investec Bank Limited Date: 02-06-2021 03:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
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