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Santam reports 10% increase in H1 gross written premium

Santam reports 10% increase in H1 gross written premium
29-08-12 / Staff Writer

Santam reports 10% increase gross written premium

Cape Town - Santam today reported a 10% increase in gross written premiums for the six months ended June 2012 compared with the previous period.  The underwriting margin stood at 6.1%, down from 8.4% a year ago, and 7.1% for the second half of 2011, but still well within in the medium target range of 5% to 7%. The net insurance margin was 8.8% against 11.2% for the comparative period in 2011 and 9.6% in the second half of 2011.

“Despite the prevailing uncertainty in the economy and pressure on consumers, Santam’s continued focus on its strategic growth initiatives, including the diversification of distribution channels and improvement of existing channels, resulted in positive growth across all significant insurance classes,” said Santam CEO, Ian Kirk.

The net underwriting result was R471 million, down 21% on the first half of 2011, due largely to claims from flooding in Mpumalanga in January and some large fire claims. “Our diverse book of business, together with a continuous focus on risk management to further improve the quality and diversity of the risk pool, provided relief from this impact,” Kirk said.

The net acquisition cost ratio increased marginally to 27.8% from 27.7% in 2011. Investment returns on insurance funds of R204 million increased from R193 million a year earlier, mainly due to a higher float balance.  As a percentage of net premium investment returns on insurance funds reduced slightly from 2.7% in 2011 to 2.6%.

The combined effect of insurance activities resulted in a net insurance income of R674 million or an 8.8% margin, compared to R787 million and a margin of 11.2% in 2011.

“Looking ahead, it is expected that whilst competitive forces may suppress premium rates in the short term, we expect rates to inevitably harden.  The underwriting margin for the second half of the year is expected to remain at the upper end of the target range, assuming the absence of large catastrophic events,” Kirk said.

The solvency margin stood at 41% at the end of June, down from 48% at the end of 2011 but still well within the targeted range of 35% to 45%.

Investment results were higher than for the comparative period mainly due to the realisation of profit with the sale of equities in anticipation of the special dividend payment in March 2012. Income before tax of R926 million was up 1% on the previous year.  Income taxes doubled over the first half of 2011 due to  Secondary Tax on Companies  of R96 million on the special dividend paid in the first half and a Capital Gains Tax provision of R59 million due to the increased inclusion rate.

As a result, headline earnings fell by 29% to 419 cents per share compared to 593 cent per share for the same period last year.  An interim dividend of 230 cents per share has been declared, up 15% from the previous period, including once-off adjustment of 7% to account for the STC saving for the company following the introduction of dividends tax.

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