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Johannesburg - Short-term insurance giant Santam appears to have better weathered the economic storm than counterpart Mutual & Federal (M&F).
On Tuesday, Santam released its results for the year to end-December 2008 showing a 35% decrease in headline earnings per share to 582c.
In presenting its results, the company said: "After a difficult first half, the Santam Group experienced an excellent second half, resulting in a pleasing overall performance for 2008 against the backdrop of the difficult economic climate."
Earlier in February M&F released its financial results, also reporting strong underwriting figures but a swing from headline earnings per share of 305c to a 41c loss per share.
When looking at a short-term insurance business, investors need to review two main aspects - premium revenue and returns on the company's investment portfolios.
Most insurance businesses in either the life or short-term insurance game have reported whopping losses on their investment portfolios. However, the underlying revenue generated by operations gives a more accurate idea of the strength of the underlying business.
In Santam's case, while headline earnings were down sharply, the company managed to grow its net insurance premium revenue figure by 9% to R11.7bn.
The company said: "From an underwriting perspective the group did very well in its southern African operations, showing a substantial increase in both underwriting profit and net insurance result over 2007. Overall earnings for the group were below 2007, attributable to lower investment returns as a result of the continued turmoil and substantial decline in equity markets."
Santam has managed to exit from its European operations - Santam Europe and Westminster Motor Insurance Association - for a pre-tax profit of R13m. The operations had weighed on Santam as a group losing R168m in 2007.
Tougher 2009
However CEO Ian Kirk did warn that 2009 was likely to be tougher.
In the results announcement he said: "The continuing financial and economic climate could impact capital growth on our investment portfolio during 2009.
Indications are that the market will be less volatile but with limited overall growth," he also warned that further reduction in interest rates will negatively impact on the groups cash-related investment returns.
He also cautioned that underwriting margins are expected to be under pressure due to the softer market, both in commercial and personal lines.
Santam, which has seen its share price rise steadily since mid December 2008 from around 6 300c a share was unchanged at 8000c despite a sharp sell off in the broader market. The company had traded around R3.3m worth of shares on the day.
Funds were net buyers of Santam in the final quarter of 2008, adding 513 000 shares to their portfolios.
- Fin24.com
