Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Santam Ltd (NAM:SNM, Financial) achieved an 8% growth in business, reflecting improved underwriting performance.
- The company's net income increased by 34% compared to 2023.
- Return on capital reached 33.6%, surpassing the target of 24%.
- The alternative risk transfer and partnerships business generated ZAR226 million in earnings.
- A special interim dividend of $5.35 was announced, marking an 8.1% increase over the same period last year.
Negative Points
- Claims inflation remains stubbornly above CPI inflation, putting pressure on the motor value chain.
- Weather-related claims have significantly impacted results, with higher intensity and volume of rain causing flash floods and property damage.
- The consumer market remains under significant pressure, affecting overall demand.
- The property class continues to require attention due to ongoing challenges and large claims.
- The MiWay business, while showing growth, has not achieved the desired increase in policy numbers and faces intense competition.
Q & A Highlights
Q: Can you give us some sense of post-June cut claims, especially July was since then had some flooding taking place?
A: Yes, we did see some more flooding claims coming through in July. The claims experience to date is lower than what we've experienced in the large last two floods. (Wikus Olivier, CFO)
Q: Provide some color on your unusual low effective tax rate? How should we expect this trend going forward?
A: It's a function of the mix between operating earnings and investment returns. For the current period, including investment return is a substantial contribution from our investment in SGI, including dividend income, which is taxed at much lower than the effective tax rate. (Wikus Olivier, CFO)
Q: The performance of the property book seems to have deteriorated year over year. What is the timeline for this book to become sustainably profitable?
A: The property class of business is complex, particularly in the commercial space. We expect the combination of data use, increased excesses, and improved risk profiling to show results over the next 12 to 18 months. (Tavaziva Madzinga, CEO)
Q: Can you give us a sense of the exposure you're taking in the growth of Santam Re premiums?
A: We were surgical in trimming exposure where we had significant motor exposure. The global P&C market is in a hard market, and we are comfortable with increased exposure across the portfolio. (Tavaziva Madzinga, CEO)
Q: Explain the sustainability of the strong performance in the alternative risk transfer (ART) business.
A: We believe these businesses are sustainable. There is an element of volatility from investment income, but the demand for ART services remains strong. (Tavaziva Madzinga, CEO)
Q: What is the strategy to grow the number of policies in MiWay?
A: We are enhancing the offering within MiWay and improving the value proposition. We are also looking at loyalty programs to reduce lapses in this competitive space. (Tavaziva Madzinga, CEO)
Q: Can you expand on the competitive environment and the ability for consumers to accept premium increases in the broker-based motor book?
A: The MiWay customer is more sensitive to pricing pressure. In the broker space, we have communicated the risk narrative effectively, allowing for selective premium increases based on risk exposure. (Tavaziva Madzinga, CEO)
Q: How do you see the net underwriting margin trending over the next few years?
A: We believe the underwriting range captures expected performance. Actions addressing motor, power surge, and property portfolios should make the midpoint range achievable and sustainable. (Tavaziva Madzinga, CEO)
Q: Can you provide some color on the fair valuation of SGI target shares and the outlook for this business?
A: The changes to valuation assumptions are minor. SGI continues to grow strongly, and the Indian macro environment supports this valuation. (Wikus Olivier, CFO)
Q: Are you seeing an increase in acquisitive opportunities emerging in this environment?
A: Our strategy is largely built on organic growth. We are disciplined around capital allocation and are not keen on acquisitions that could create a drag on performance. (Tavaziva Madzinga, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
