Santam delivers robust financial growth despite weather challenges

Santam, South Africa’s heavyweight in short-term insurance, on Monday posted a cracking set of results for the year ended December 31, 2024, proving it can weather storms - not only constrained consumer spending but millions of rands in underwriting losses from big weather events. 

Headline earnings per share rocketed 51% to 3 477 cents, up from 2 310c in 2023.

Santam posed a final dividend of 985c per share, up 9% from last year, bringing the total dividends for 2024 to 1 520c.

Gross Written Premium (GWP) climbed 11% to R41.3 billion, while Net Earned Premium grew a solid 10%. Investment returns on capital jumped to R1.3bn from R1.1bn, and the net underwriting margin leapt to 7.6% from a leaner 3.5% in 2023 - landing comfortably in the company’s 5%-10% target range. Santam’s balance sheet looks rock-solid too, with an economic capital coverage ratio of 166%, up from 155% in 2023, just above its 145%-165% sweet spot.

It wasn’t all smooth sailing, though. South Africa’s economy took its knocks in 2024—high inflation and interest rates squeezed disposable incomes, while extreme weather events kept claims teams busy.

Gross claims paid to policyholders hit R28.6bn, down a touch from R29.9bn in 2023, with weather-related catastrophes steady at R748 million, marginally higher than the R744m seen the year before. Still, Santam’s motor and property books grew GWP by 7% and 10%, respectively, and its alternative risk transfer (ART) business stole the show, boosting profit contribution by 51% to R781 million.

Tavaziva Madzinga, Santam’s Group CEO, credited the company’s refreshed FutureFit 2030 strategy for the turnaround.

“The positive turnaround in electricity supply in 2024 and progress in addressing the country’s infrastructure challenges, bode well for future economic growth in South Africa. More importantly, over the last two years we have built a solid foundation with our refreshed strategy, which set in place appropriate mechanisms to not only meet the challenging market conditions but ensured that our multi-channel operating model responded well to the needs of our policyholders, intermediaries and other stakeholders,” he said.

The strategy’s paid off, with the underwriting margin hitting 7.6% despite R652m in losses from big weather events- Western Cape, Eastern Cape, and KwaZulu-Natal - and R238m in fire-related claims, down from R536m in 2023.

On the growth front, South Africa still dominates, delivering 82% of GWP at R33.9bn, up from R31.5bn, while international business chipped in 18% with R7.4bn.

The transfer of MTN’s in-force book to Santam’s licence in quarter one 2024 gave the Partner Solutions arm a boost, and an A- (Excellent) rating from AM Best, secured late last year, has opened doors for global expansion. Santam Re’s restructuring is also set to bear fruit down the line, the insurer said..

Economic conditions are expected to improve slightly in 2025, with a forecasted GDP growth rate of 1.5%, up from 1.1% forecasted by the SARB at the end 2024. Together with easing pressure on personal disposable income, and a strategic focus on higher growth areas in the direct, partnership and international business areas, Santam is positive about topline growth prospects in 2025.

Looking ahead to 2025, Santam is cautiously optimistic. It said with GDP growth forecast at 1.5% -up from the 1.1% the South African Reserve Bank forecast at the end of 2024—and easing pressures on personal disposable income, "Santam is positive about topline growth prospects in 2025."

But Madzinga warned the weather’s not done with them yet. “Volatile weather conditions are expected to persist, which may result in volatility in underwriting margins. The underwriting actions we implemented to date will, however, position us well to manage these. We remain confident in the Group’s prospects and the potential to deliver enhanced growth and profitability,” he said.

The share price fell 1.18 % ot R398.61 on the JSE on Monday on the JSE at 11.32am. 

* This story will be updated later.

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