Mid Cap Darlings – Santam
Mid Cap Darlings – Santam
Published Date: 2019-05-16 | Source: INCE|Community | Author: Sifiso Skenjana
Insurers tend to be like those reliable yet strict friends that for the most part, you can call on when you in a bit of a sticky situation. Albeit after a bit of a lecture. Established in the Cape in 1918, this old toppie of a firm boasts being the largest short-term insurance company in South Africa, with a market share of 22%, with almost double the market share of its nearest competitor. Some of the popular insurance brands that are subsidiaries of Santam include MiWay, Centriq and Mirabilis.
Business Model: The company provides cover to more than 1 million policy holders in more than 31 countries and more than 80% of the Top 100 companies on the JSE. The company generates most of revenue through personal insurance (33% gross premiums) and commercial insurance (44% gross premiums).
Macro Landscape: The short-term insurance market is broadly impacted by economic growth, inflation and the advent of particular weather events. In a South African context all the above metrics have been under some considerable pressure, with economic growth continuing on a lacklustre path, inflation being driven largely by external factors and increasing incidents of bad weather events.
Results (year ended Dec 2018): Gross written premiums for personal and commercial insurance increased between 2017 and 2018 by 5.7% and 8.4% respectively. Motor and Property insurance took the lion's share of insurance premiums written in conventional insurance. In the 2018 South African Customer Satisfaction Index (SAcsi) for Short-Term Insurers, conducted by Consulta showed that customers were most happy with Santam and its offerings.
Growth Prospects: Insuretech, the new players disrupting the insurance industry continue to keep the top players on their tippy toes. These companies have come in and reduced the cost of insurance as well as increasing the perceptions of value for insurance and insurance products. Interesting new Insuretech players are Pineapple and Naked Insurance - check them out. On the whole however Santam seems to have broadly understood their clients and their insurance needs. Long-term investors are more likely to benefit from a growth in this share price than those seeking short term portfolio gains.
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About The Analyst: The Mid Cap Darlings is brought to you by the Awkward Economist - Sifiso Skenjana. He has a breadth of experience in portfolio management, economic research and investment strategy and management consulting. He is founder and financial economist at AFRA Consultants. He is currently pursuing his PhD.