Risk management concerns Santam CEO
Johannesburg - Shares in short-term insurer Santam rose on Tuesday, after the company announced that interim earnings increased by 80% and declared a special dividend of R5 per share on the back of strong cash flows.
Santam shares were trading up 142c (1.3%) in Wednesday late afternoon trade at R114.47 per share, following the release of results for the six months ended June 30 2010.
Asked about the special dividend, CEO Ian Kirk told Fin24.com: "We really stick to the capital efficiency principle and if we run over the top, we give it back to shareholders."
Kirk went on to say that Santam had a good track record of delivering special dividends, having paid out four in the last 10 years.
While operating conditions had been kind to Santam, Kirk was cautious on the outlook for the business.
"One of the things that I am concerned about is poor risk management on the ground in industrial South Africa," he said. He is anxious about maintenance and safety standards, which need to be watched carefully, as well as the effect of vandalism and crime on local businesses.
About 80% of Santam's earnings come from the business and commercial market, and Kirk said companies remained vulnerable. "Conditions aren't great, but the business is fighting hard and we have done a lot of work in the intermediate space; we have in fact grown marketshare, which is a credible result."
Kirk was also cautious about the outlook for the rest of the year.
"It is anticipated that the market will continue to be soft, both for commercial and personal lines business as the recovery of the domestic economy is slower than anticipated.
"We remain concerned over the low levels of disposable income of individuals and earnings pressure on businesses which make achievement of an appropriate risk rate challenging," he advised shareholders.