March 6 (Bloomberg) -- MMI Holdings Ltd., South Africa’s third-largest insurer, said fiscal first-half profit rose 82 percent as the firm cut costs and a rally in the stock market boosted the value of investments.
Net income climbed to 1.47 billion rand ($163 million) in the six months ended Dec. 31, from 805 million rand a year earlier, the Cape Town-based insurer said in a statement today. Diluted earnings per share increased 77 percent to 94 cents, while the dividend rose 16 percent to 51 cents a share.
MMI has been cutting costs to shore up earnings since its 2010 creation from the merger of FirstRand Ltd.’s Momentum Group Ltd. and Metropolitan Holdings Ltd. The insurer, which operates in 12 countries outside of South Africa, invests some of the money it receives from insurance policies in the stock market and in the six months through December South Africa’s FTSE/JSE All Share Index gained 17 percent.
“Equity markets rose strongly during the reporting period while long bond interest rates closed slightly lower,” MMI said in the statement. “Targeted merger savings of 500 million rand are on track, with a reduction of 256 million rand recorded to date. Overall, the benefits envisaged as part of the merger rationale are being realized.”
MMI climbed 2 percent, the biggest gain since Dec. 11, to close at 23.20 rand in Johannesburg. Volume of shares traded was more than triple the three-month daily average. That extended this year’s advance to 4.7 percent and gave the company a market value of 36.4 billion rand.
The insurer increased the value of new business an annual 18 percent to 340 million rand. The capital buffer, or cash set aside against insolvency, was 3.8 billion rand at the end of December, MMI said.
MMI also set aside 500 million rand for investment in Africa.
“The money is available either as additional investments or for the acquisition of businesses ideally in those 12 countries where we operate,” Nicolaas Kruger, chief executive officer of MMI, said in a telephone interview. “Southern Africa is one growth area but more likely we will target a combination of East Africa including Kenya and Tanzania, and then West Africa with Ghana and Nigeria.”
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