DURBAN – Santam, South Africa’s largest short-term insurer, said yesterday that it had already paid R950million in relief payments to support small and medium-sized commercial policyholders and businesses distressed as a result of Covid-19.
Santam said it made a provision of R1.3billion in the six months to end June by estimating the exposure relating to policies with contingent business interruption (CBI) extensions, despite significant uncertainty regarding the size of these claims.
Chief executive Lizé Lambrechts said an amount of R950m of the R1bn allocated in July had already been paid by yesterday to more than 2400 small and medium-sized businesses.
“Our decision to come through for the small to medium-sized businesses was informed by the fact that they have little reserves to count on when something like Covid-19 happens and most of them are new businesses and don’t have the ability to go to the banks to raise some funding to keep them going,” Lamprechts said.
However, Santam is facing a legal battle after hospitality group Ma-Afrika Hotels took the insurer to court regarding the CBI cover. The Western Cape High court has reserved judgment on the matter for at least a month.
“Our reinsurance programme will only respond to claims covered under the terms of our policies. In order to formulate a reinsurance claim under a different interpretation of the policy wording to our own, such interpretation would have to be definitively decided by the South African courts.
“We want to resolve this matter and get clarity as soon as possible,” Lambrechts said.
In the results, Santam reported a 33percent decline in headline earnings per share to 663cents a share, down from last year’s 990c.
Santam was impacted by an already weak operating environment in South Africa, which has deteriorated substantially since February as the government implemented strict measures to control the spread of Covid-19, resulting in a significant slowdown in economic activity.
The group reported gross written premium on conventional insurance growth of 4percent to R14.8billion, with conventional insurance net underwriting margin of 4.3percent.
Santam said that the underwriting margin was at the lower end of its target range and was impacted by a provision of R1.3bn for contingent CBI.
The group did not declare an interim dividend, given the current uncertainty around the eventual outcome of Covid-19-related claims.
Looking ahead, Lambrechts said the economic activity would, in the medium-term, be significantly constrained by weak consumer spending due to the impact of Covid-19 as well as the likelihood of further load shedding.
“We will focus on continued operational effectiveness, tight cost management and customer service,“ Lambrechts said.
Santam’s share price closed 0.81percent higher at R250.01 on the JSE yesterday.