South African short-term insurer Santam said on Tuesday that its overall growth of quality business is in line with expectations for the period, while the underwriting result for the year to date is pleasing.
Releasing an operational update following its annual general meeting on Tuesday, Santam said — as mentioned at the announcement of its 2006 financial results in February — that pricing and underwriting margins in the South African short-term insurance market remain under pressure.
“The corrective actions taken since last year started to yield positive results on our personal lines and commercial portfolios. Adverse weather and severe drought conditions have placed strain on our crop business,” Santam said.
The company’s investment portfolio performed well, in line with the strong local equity market, contributing to better-than-expected headline earnings, it added.
Shareholders were also reminded of the inherent volatility of underwriting and investment activities.
Santam said that to date, good progress had been made with the envisaged capital-management actions. The voluntary buy-back programme resulted in 5,88% of the shares being bought back at R102 per share, reducing capital by R711-million.
The R600-million subordinated debt issue was successfully placed on May 8. Non-redeemable preference shares have been created, but given the volatility and uncertainty in this market, the company decided to delay the decision to raise preference share capital. The intention remains to manage the South African solvency margin down to approximately 40%.
The scheme of arrangement between Santam and its shareholders pursuant to its broad-based black economic empowerment ownership initiative became operative on May 21, and the cost of the transaction will result in a charge to the income statement in terms of IFRS 2, the International Financial Reporting Standard for share-based payments.
Details of the transaction are in the process of being determined and once finalised, the amount and timing of the income-statement charge, and the effect on the company’s net asset value, if any, will be determinable, it said.
Santam is due to report its interim results on August 21. — I-Net Bridge