The insurer which spent a big part of 2020 entangled in a legal battle with its business-interruption clients, said on Friday afternoon that these claims relating to Covid-19 lockdown significantly impacted its underwriting results.
The company said its net underwriting margin – which gauges premiums an insurer receives, minus expenses and claims paid out – was expected to be below its long-term target range of 4% to 8%. The insurer still expects a positive underwriting profit thanks to reduced claims in other areas of its business.
Santam said it experience a “benign claims environment ” on its motor insurance book. Motor insurers are expected to report lower claims than usual for 2020 because their clients have been driving less as more people worked from home for most of the year.
Curfew hours and alcohol trading bans might have also contributed to the reduction in accident-related claims. But Santam is expected to give more colour on this when it presents its annual financial results on or about 4 March 2021.
Apart from the lockdown claims, Santam said its headline earnings per share were also adversely affected by lower investment results. As for earnings per share, this measure of profit bled because of the R690 million impairment of Santam’s investment in Moroccan insurer, Saham.
The impairment charges only affect earnings per share, thus the much deeper decline on these compared to headline earnings.
Santam had a R2.3 billion investment in Saham at the end of 2019. But because Covid-19 hit that business hard and because Saham was forced to write down value of its Lebanon operations to zero after the August 2020 blast, Santam was left with one choice: to recognise an impairment.