Santam holds on to cash amid legal battle over business interruption claims
Short-term insurer Santam has opted to hold on to its interim dividend as it continues a legal battle over business disruption claims following the Covid-19 lockdown.
Santam has raised a claims provision of R1.29bn as of its six months to end-June, as the best estimate of its exposure relating to policies with contingent business interruption (CBI) extensions.
In July, the insurer pledged R1bn in relief to policyholders that have the CBI extension in their policy cover, referring to an extension to other insurance.
Santam has appealed an application brought against it in the high court in Cape Town by Cape-based hotel group Ma-Afrika Hotels, and is awaiting a ruling.
“Given the current legal process, there is, however, significant uncertainty regarding the quantification of these claims,” the group said.
Should the courts ultimately rule in Santam’s favour and determine that the lockdown is not an insured peril, then the amount paid will still be considered relief payments in respect of registered claims to policyholders and will not be recovered from policyholders, the group said.
However, if the courts rule against Santam and determine that the national lockdown is an insured peril, the amount will become an advance payment against any finally determined claims against Santam under the CBI extension.
Santam reported headline earnings fell a third to R731m to end-June, with the group opting not to pay a dividend, having paid out R3.92 a share previously.
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