Santam, South Africa’s biggest short-term insurer, posted a profit explosion in the six months to June this year, bolstered by the significant improvements in underwriting and investment results.
Santam, which is majority-owned by Sanlam, South Africa’s second biggest life insurer, said headline earnings a share for the period under review were likely to be 115 percent to 125 percent higher than the previous comparable period.
The market seemed to like this performance as Santam’s share price gained 5 percent on the JSE during afternoon trade on the back of a positive trading update.
“The improvement in underwriting results was influenced by a turnaround in the crop insurance business compared to the significant losses recorded in 2013,” Sanlam said in a trading update released on Tuesday.
Insurance firms use underwriting to measure risk exposure and determine the premium that needs to be charged to insure that risk.
“The group’s investment performance was in line with the market…Positive fair value movements in Santam’s interest in the Sanlam Emerging Markets (SEM) general insurance businesses in Africa, India and South East Asia further enhanced the investment performance,” it continued.
South Africa’s insurance firms invest some of their money on equities and the JSE has performed very well since the beginning of the year, meaning Santam has cashed in on this good JSE running.