Financial services group Sanlam on Thursday said its insurance business unit, Santam, had a tough six months as it had to pay a large number of property claims for Knysna and Plettenberg Bay fires in the Western Cape during the period.
The devastating Knysna and Plettenberg Bay fire disasters in June destroyed hundreds of properties, claimed seven lives and burnt through thousands of hectares of land.
As a result, Santam had to pay a number of commercial property claims due to catastrophe events including a severe winter storm that caused widespread damage in Cape Town and strong winds from the same storm that drove runaway wildfires in the Knysna and Plettenberg Bay areas.
Santam’s overall underwriting margin declined from 6.4 percent in the first half of 2016 to four percent in 2017 assisted by its diversified book.
Despite this, Sanlam pointed to the sustained focus on the execution of its strategy as it announced satisfactory operational results for the six months ended 30 June 2017.
A highlight for the period was the strong growth in value of new life covered business written, with the net value increasing by 11 percent at a margin of 2.61 percent, which exceeds the comparable 2016 margin.
The group reported an increase of one percent in net result from financial services compared to the same period in 2016.
The group said the relatively low level of growth was largely attributable to the significantly stronger average rand exchange rate; higher new business strain at Sanlam Personal Finance following good growth in risk business; catastrophe claims experience at Santam; and one-off credit provisioning in Shriram Capital following demonetisation in India.
Sanlam chief executive Ian Kirk said they were satisfied with the results for the first six months of the financial year and that their focus on strategic execution continued to support their business performance.
“We expect the economic and operating environment to remain challenging for various reasons across our footprint for the remainder of the year,” Kirk said.
“However, we are confident that our staff and management will continue to diligently execute on the strategic priorities we have identified and we believe this will sustain our performance going forward.”
Sanlam Emerging Markets’ net result from financial services declined by two percent.
The rest of Africa operations, excluding Saham Finances, grew their contribution by 37 percent with most businesses achieving strong growth.
Net result from financial services in India declined by five percent due to the stronger rand exchange rate and demonetisation-related credit provisioning, partly offset by structural growth.