S.Africa's Santam posts surprise 4 pct rise in FY earnings

JOHANNESBURG Wed Feb 26, 2014 8:48am EST

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JOHANNESBURG Feb 26 (Reuters) - South African short-term insurer Santam on Wednesday reported a surprise 4 percent increase in full-year earnings after booking a record level of premiums, sending its shares higher.

South Africa's largest property and casualty insurer said diluted headline earnings totalled 1,023 cents a share in the year to end-December, from 984 cents a year earlier.

The profit growth was unexpected, as four analyst polled by Reuters had expected earnings to fall by nearly 9 percent to 898 cents. Headline EPS, the main profit measure in South Africa, excludes certain one-time items.

"Market conditions for general insurance are very tough," Chief Executive Ian Kirk told Reuters, citing weather conditions and a weak exchange rate that drives up the cost of repairs for clients.

The insurer, which is majority-owned by Sanlam, said its gross written premiums - which refers to the amount customers are required to pay for their insurance policies during the period - rose 6 percent to a record 20.6 billion rand ($1.92 billion).

Its net underwriting margin, a measure of its profitability commonly used by insurers, was at 2.8 percent, lower than the 4 percent it posted in 2012.

The company targets an underwriting margin of 5-7 percent, he said.

"We are not happy with the result, it's lower than what we target in the medium to long term, in underwriting margin term," Kirk said.

The insurer declared a final dividend of 433 cents per share, from 230 cents a year ago.

Its shares were up 2.6 percent at 169 rand by 1345 GMT, but have lost more than 10 percent so far this year. The All-Share index was up 0.2 percent on the day. ($1 = 10.7258 South African rand) (Reporting by Helen Nyambura-Mwaura; editing by David Dolan)

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