End of year bonus for Santam shareholders

Santam shareholders got an unexpected windfall today when the short-term insurer announced a special dividend of 2200 cents per share to be paid on 24 December 2007.

All registered shareholders as on 13 December 2007 will benefit.

According to (Mr) Ian Kirk, chief executive, significant progress had been made in the capital restructuring of the company and the declaration of the special dividend will reduce Santam’s South African solvency to more optimum levels as part of its ongoing capital efficiency programme.

The announcement comes on the back of a strong set of interim financial results declared in August this year. From January to June, Santam generated an annualised return on weighted average shareholders’ funds of 27.4% compared to 21.6% for June 2006.

“As mentioned with the announcement of our 2007 interim financial results in August this year, pricing and underwriting margins in the South African short-term insurance market remain under pressure due to the continued softening of the market, particularly in the corporate and commercial sectors,” the Santam Board said in an operational update to shareholders released today.

They also reminded shareholders of the “inherent volatility of underwriting and investment market activities”.

“Santam Europe Ltd, the group’s Dublin based insurance company, has not performed according to our expectations and as part of the normal review of our businesses, it has been decided to discontinue the operations by placing the company into final run-off. However, overall the underwriting result of the group for the year to date remains satisfactory.

“Furthermore, our investment portfolio performed well, in line with the strong local equity market.”

Significant progress has been made with the finalisation of Santam’s Broad-Based Black Economic Empowerment (BBBEE) transaction entered into earlier this year. The first allocations (to staff only) are expected to be made during December 2007, and it will not have a material effect on the income statement of the group in 2007.

On 2 November, Santam successfully placed a further R400 million tranche of unsecured subordinated callable notes. This placement completes the group’s debt raising programme.

Santam will publish its abridged financial results for the 2007 financial year during the last week of February 2008.