Rising claim costs weigh on Sanlam’s half-year results

Sanlam, one of South Africa's leading financial services groups, has found itself in the spotlight following a recent investigation by the Competition Commission into pricing practices within the life insurance industry. Abigail Mukhuba, Sanlam's CFO, addressed the concerns during an interview with CNBC Africa, emphasizing the company's commitment to the best interest of customers. Mukhuba stated that all pricing practices are designed to deliver great value to customers, with a focus on fair treatment and ethical standards. Despite the scrutiny, Sanlam remains confident in its operations, citing strong oversight from independent directors and regulatory bodies like the South African Reserve Bank and the Financial Sector Conduct Authority. The company asserted that it has not been directly approached by the commission and is cooperating by reviewing relevant documentation internally. Moving on to the financial performance, Mukhuba discussed the impact of rising claim costs on Sanlam's half-year results. The company reported a drop in profits due to weak investment returns and challenges in the short-term insurance sector. Mukhuba acknowledged the perfect storm faced by the industry, highlighted by factors such as severe weather events, load-shedding, and inflation, leading to increased claim costs. Despite these challenges, Sanlam managed to outperform competitors in a tough market environment, maintaining margins and achieving growth in key business segments. Looking ahead, Mukhuba expressed optimism about the company's prospects, while acknowledging ongoing headwinds related to inflation and market uncertainties. Sanlam expects short-term insurance premiums to rise significantly in response to elevated claim frequencies and costs. The company stressed the importance of sound pricing practices to sustain operations in a competitive market. While recognizing the potential impact on consumers, Sanlam remains committed to delivering quality service and ensuring claims are promptly settled. In conclusion, Mukhuba underscored the need for collective efforts to manage systemic risks and mitigate the escalating costs of insurance. Collaboration between stakeholders, including government, businesses, and individuals, is crucial to address underlying factors affecting the industry's financial landscape.