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Facing perils with a brave face is not an easy cross to bear

08 December 2015 Jonathan Faurie
Cedric Masondo, MD, Sasria

Cedric Masondo, MD, Sasria

As we ramp up towards an important municipal election year, the socio economic situation in South Africa is becoming tense as service delivery strikes and protests increase. This is putting significant stress and strain on Sasria which exists to cover the public against these types of perils. While the frequency of strikes and protests has intensified over the past year, the state run insurer is doing its best to provide a world class service.

Running the numbers

Looking at the company’s key performance indicators for 2015, which was included in its 2015 Annual report, claims severity increased by 25% while return on investments declined by 7.1% to a return of R389.7 million.

If we put this into perspective we can see the true nature of the severity of these figures. The report expanded on the perils placed at its doorstep by pointing out that the company had to face R28.5 million worth of claims in the wake of the xenophobic attacks which took place earlier in the year. The majority of these claims were special risk events relating to business for items such as loss of stock, damage to fixtures and fittings as well as damages to buildings and vehicles.

In addition, it received claims worth R2 million as a result of damages to vehicles during a student protest earlier in the year. This is excluding the recent spate of student protests which cannot be calculated as claims have not been submitted. These figures will only be known in January.

Service delivery protests and salary related strikes are the major perils faced by Sasria as those protests are a frequent occurrence in the country. According to the report, the company received R14 million worth of claims following a mining protest where significant business interruption occurred and mining vehicles were damaged. It also received a R500 000 claim for a vehicle which was burned during a service delivery protest.

The increased drivers

It comes as no surprise that the main drivers of the perils is service delivery protests; but are we fully aware of the severity of the situation?

The Sasria report points out that there was an overall increase of 54% in the number of claims that the company had to deal with in 2014/15. The total number of claims during the year was 2 349 claims as opposed to the 1 525 claims received during 2013/14.

The severity of claims also increased and is directly related to the fact that labour strikes increased by 82% during the year under review. The frequency of incidents in relation to the increase in strike action increased by 63% moving up from 919 incident in 2013/14 to 1 496 incidents in 2014/15. The report indicates that strike related claims cost the company R395.5 million during 2014/15.

There was also a significant increase in claims relating to service delivery protests. In 2014/15 claims accumulated to R113.1 million while the claims payout in 2013/14 was R85 million.

Not all doom and gloom

Despite the challenges faced by Sasria, there was some good news coming out of its performance during 2015. One of the biggest areas of improvement was the outperformance of  the industry average in premium growth by 1.4%. While this does not seem a lot, it is significant in a market where any premium growth is hard to come by. Sasria’s gross written premium also increased by 9.5% to R1.52 billion.

The solvency ratio of a company is always a good indicator on the health of the company. While it faced many challenges during the year, its solvency ratio increased from 1 325% to 1 334%. The company’s assets under management indicator is also in a healthy state at R5.8 billion.

A state of comfort

While a company like Sasria can never become complacent when it approaches the challenges it faces, MD Cedric Masondo reports that it is definitely heartening to see the company in a comfortable financial position.

“I would definitely see our performance during 2015 as a highlight. The company has achieved a R834.1 million net profit before tax and has a strong balance sheet. Sasria has sufficient cash flow to meet our policyholder’s obligations which means that we will continue to be in a position where claims can be paid when claims occur,” says Masondo.

A major highlight for Masondo was also the fact Sasria was able to outperform the industry when it came to new premium growth. He adds that although Sasria is a state owned company, the management at Sasria sees the company first and foremost as a business which needs to be well managed and well governed.

Editor’s Thoughts:
The fact that Sasria is in a position to meet its commitments is a welcome relief bearing in mind that we are heading towards a municipal election year. One wonders what type of a year the company will have if government cannot deliver on promises that it keeps on making yet keeps on breaking. I would like to hear your thoughts. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Humphrey, 08 Dec 2015
I do not believe one can compare an entity such as Sasria with conventional insurers or the rest of the market in terms of out performance on premium growth (or in any other respect). At the end of the day it is a monopoly protected by legislation that does not face the competitive issues of a conventional insurer. Also, its premium income on non-motor will alwys go up due to inflationary effects on sums insured so there is an automatic increase in premiums. On the motor side, reducing vehicle values do not impact on premiums charged so it is not faced with this problem or policyholders downscaling on vehicle type.
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