Santam posts strong performance for 2024 financial year

KEY HIGHLIGHTS OF RESULTS:

• 32% return on capital, exceeding the hurdle rate of 24%,
• 11% increase in Gross Written Premium,
• 10% increase in Net Earned Premium,
• 6% net underwriting margin (2023: 3.5%),
• 3 billion investment return on capital, up from R1.1 billion in 2023,
• 985c (2023: 905c) declared as a final dividend per share, up 9%, with cumulative dividends declared in respect of the 2024 financial year amounting to 1 520c.

Santam, has delivered a strong performance, with the group recording a 7.6% (2023: 3.5%) underwriting margin, an 11% Gross Written Premium (GWP) (2023: 6%) and 10% (2023: 6%) Net Earned Premium (NEP) growth for the year ended 31 December 2024.   

The strong performance was despite a challenging operating environment, which was shaped by a combination of extreme weather events, and a range of socio-economic factors impacting South Africa. These factors included dampened personal disposable incomes as a result of high inflation and elevated interest rates. Geopolitical tensions in other regions also affected the operating environment.

The formation of a Government of National Unity has seen progress on a number of structural constraints to economic growth, supporting business and investor confidence.

“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,” said Tavaziva Madzinga, the Santam Group CEO.    

He added that the refreshed FutureFit 2030 strategy and a range of underwriting actions implemented over the past two years, had positioned Santam well to deliver a marked improvement in financial performance in the 2024 financial year.

Highlights during the period were the 7% and 10% growth, respectively, in GWP from the motor and property classes. The alternative risk transfer (ART) businesses performed well and grew their profit contribution by 51%, from R516 million in 2023 to R781 million in 2024. The transfer of the MTN in-force book to the Santam licence, in the first quarter of 2024, has also seen good growth. The group and all of its principal subsidiaries also remain well-capitalised, with an economic capital coverage ratio of 166% (December 2023: 155%), slightly above the upper end of target range of 145% to 165%.

Headline Earnings Per Share increased to 3 477c (2023: 2 310c), a 51% increase, and gross claims paid to policyholders were R28.6 billion (2023: R29.9 billion). Claims from weather-related catastrophes amounted to R748 million in 2024 (2023: R744 million).

At 82%, the South African market continues to be a significant contributor of GWP to the Group, which equated to R33.9 billion (2023: R31.5 billion) of business written. From outside South Africa, GWP contributed 18%, amounting to R7.4 billion (2023: R5.8 billion).

To support the international growth strategy, Santam obtained, at the end of 2024, an international A- (Excellent) financial strength rating from AM Best, one of the world’s largest credit rating agencies specialising in the insurance industry.

CONVENTIONAL INSURANCE: GROWTH

The Group’s GWP and NEP, respectively, saw growth of 11% and 10% during the period under review. All business units contributed to the growth in GWP, with the Specialist Solutions business, however, experiencing a marginal decline in business volumes. This was mainly due to the casualty and corporate property business being negatively affected by the aggressive deployment of capacity, at unsustainable premium rates, from international players.

The Broker Solutions and Client Solutions businesses continued to strengthen premium rates and achieved robust growth in excess of the group’s target range, while Partner Solutions grew strongly from a low base, supported by the transfer of the MTN in-force book. MiWay’s new inbound and tied agency strategies gained traction, with the company achieving an overall 8% GWP (2023: 5%) growth.

Santam Re has been successfully restructured and is expected to deliver improved profitability over the medium to long term.

CONVENTIONAL INSURANCE: UNDERWRITING PERFORMANCE

The Group achieved a 7.6% underwriting margin, well within the 5% - 10% target range. The company experienced a similar number of significant weather-related events in 2024 (catastrophe claims from a single event in excess of R100 million) compared to 2023.

Losses from these events were more severe in 2024 at R652 million compared to R583 million in 2023. The events were widespread across the Western Cape, Eastern Cape and KwaZulu-Natal. Cumulative claims from all events categorised as catastrophes were in line with 2023 at R748 million (2023: R744 million). These losses were all within the group’s retention limits and no reinsurance offsets applied. Other significant losses (mostly fire-related) amounted to R238 million, declining from R536 million in 2023.

Underwriting actions implemented significantly improved the risk profile and rating strength of the Group’s in-force book. This created positive earnings momentum that enabled the Group to absorb the large loss experience of close to R1 billion while remaining slightly above the mid-point of the target range. The property portfolio turned profitable in 2024 compared to the sizable underwriting losses experienced over a number of reporting periods,

PROSPECTS

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.

“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,” said Madzinga.

A final dividend per share of 985c (2023: 905c) has been declared, with cumulative dividends declared in respect of the 2024 financial year amounting to 1 520c.