Santam FY HEPS down 27% on challenging underwriting period

Santam, South Africa's largest insurer, has been grappling with a challenging period marked by a series of natural disasters and increasing crime rates. The company recently reported a significant drop in earnings, with claims reaching an all-time high in its history. The earnings for the year ended 31 December 2022 fell by 27%, reflecting the immense financial pressure Santam has been under. Santam CEO, Tavaziva Madzinga, shared insights on the company's performance in an interview with CNBC Africa. Madzinga acknowledged the extraordinary circumstances that led to the record number of claims, citing a combination of floods, fires, power surges, and rising crime as key contributors. Despite the tough period, he highlighted the company's swift response in implementing stringent underwriting and management actions in the second half of the year. This proactive approach resulted in a significant improvement in business performance, with the underwriting margin climbing to 7% from a low of 2.3% in the first half. The CEO emphasized the resilience of insurance companies in dealing with adversities like those faced by Santam. Despite paying out nearly 30 billion rand in claims for 2022, the company maintained confidence by distributing progressive dividends to shareholders. Madzinga expressed optimism about sustaining target ranges and maintaining momentum moving forward. Madzinga addressed concerns about ongoing challenges such as load shedding and energy crises, noting that while power surge claims increased, they remained minimal compared to other claim categories. He reassured stakeholders that Santam was well-equipped to navigate systemic issues like load shedding and grid failures. Looking ahead, Madzinga outlined Santam's growth strategy, which focuses on market penetration in segments where the company currently has limited presence. By reimagining customer engagement through digital channels and direct interactions, Santam aims to cater to younger demographics and expand its market reach. The company also intends to leverage its expertise in reinsurance and specialty products to drive growth outside South Africa. Furthermore, Santam plans to establish large-scale partnerships to access customers at scale, supplementing these efforts with advanced technologies like artificial intelligence and data analytics. The CEO highlighted the importance of effective data utilization in understanding and managing risks amidst a volatile business landscape. In terms of digitalization, Santam is embracing technology to enhance risk assessment and customer interactions. Initiatives such as geocoding properties to accurately price risks and offering online policy issuance through platforms like MyWay Blink are transforming the way the company operates. By combining digital innovations with its established broker business, Santam aims to improve customer experiences and drive operational efficiency. As Santam continues to navigate through challenging times, Madzinga reiterated the company's commitment to sustainable growth and resilience in the face of uncertainties. By adapting its business model, leveraging technology, and exploring new opportunities, Santam seeks to strengthen its market position and meet evolving customer needs.