Santam Gains Most in 6 Years as Rand Helps Curb Cost of Claims

  • Recovery in equity markets likely to boost investment income
  • Stock is up 20% year to date after falling 12% in 2015

Santam Ltd., South Africa’s largest property and casualty insurer, gained the most in almost 10 years as a stronger rand and advances in local equity markets provide a better outlook for its business.

The stock gained 12 percent, the most since August 2006, to 241.32 rand by the close in Johanesburg. That’s the highests since February 2015, valuing the company at about 27.8 billion rand ($1.82 billion). Santam has risen 27 percent this year after dropping 12 percent in 2015. Volumes surged with 533,465 shares traded, or 7.5 times the three-month daily average.

The rand, after sliding 26 percent against the dollar last year, has gained 1.2 percent in 2016. The FTSE/JSE Africa All Share Index has climbed 6.2 percent this year, outstripping the 4.1 percent gain in the MSCI Emerging Markets Index. The benchmark has advanced 16 percent from its January lows, boosting Santam’s income from investing premium revenue in the stock market.

“With the strengthening rand, there’s less likely to be upward pressure on the cost of vehicle parts and repairs, which form a meaningful part of their motor-claims costs,” Nico Smuts, an analyst at 36One Asset Management, said Friday by phone from Johannesburg. “Markets are recovering and Santam has a fairly significant part of their earnings coming from their float. When the markets go up, the investment return on the float goes up as well.”

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