Operational update to shareholders following the board meeting held on 25 November 2015
This serves as a general communication to Santam shareholders with regard to the business environment for the ten month period ended 31 October 2015.
The Santam Group continued to achieve strong underwriting results following the 30 June 2015 interim reporting period. Despite the tough general economic climate and competitive pressures in the retail and corporate market segments, the group marginally improved gross written premium growth compared to the first 6 months of the 2015 financial year.
The personal, commercial and specialist intermediated business lines delivered excellent underwriting results during the period due to the positive impact of underwriting actions and fewer large claims. MiWay maintained its growth momentum together with favourable loss and acquisition cost ratios. Santam Re made a positive contribution to the Group underwriting results.
The return on insurance funds was positively impacted by the increase in interest rates and improved returns on foreign currency assets.
The Group’s investment performance was in line with the market for the period subsequent to 30 June 2015 and benefited from the impact of the weaker Rand on foreign currency assets. Regulatory approval was obtained for the sale of Santam’s 33.6% equity interest in Credit Guarantee Insurance Corporation of Africa Limited for R602 million in October 2015 and the transaction has now been completed.
The boards of directors of Santam and Sanlam Limited (Sanlam) announced on 24 November 2015 the conclusion of agreements, whereby Sanlam’s wholly owned subsidiary, Sanlam Emerging Markets Proprietary Limited (SEM), and Santam will jointly acquire an effective 30% interest in Saham Finances, the insurance arm of the Saham Group incorporated in Morocco, through a special purpose vehicle held jointly by SEM as to 75% and Santam as to 25%, for a total cash consideration of US$ 375 million. The transaction is subject to regulatory approval. For further details refer to the SENS announcement dated 24 November 2015. This transaction will increase Santam’s exposure to higher growth opportunities in Africa in general insurance. Saham Finances operates in 26 countries across the continent and the Middle East.
Headline earnings remain susceptible to the inherent volatility of underwriting and investment activities.
The group’s solvency margin as at 31 October 2015 is marginally above the upper end of the target range of 35% to 45% of net premiums. Given the impact of the Saham Finances transaction as well as other potential business opportunities the Board is of the view that Santam is appropriately capitalised.
The next set of results will be the annual results for the year ending 31 December 2015 to be released on SENS on 2 March 2016.