Financial analysts have declared Santam as South Africa's best short-term insurer, followed by Mutual & Federal (M&F).

Although the shares of both insurers are regarded as good investments, Santam is far ahead of its competitor analysts said. The company is currently trading at 2.3 times its book value compared with M&F, which is trading at 1.6 times its book value.

In the six months to end-June Santam, despite the global economic crisis and the recession, managed to produce an underwriting profit of 88 million rand, while M&F suffered an underwriting loss of96 million rand.

In July this year, when M&F announced its interim results, shareholders were disappointed when it passed its dividend for the second successive year.

Investec Asset Management analyst Sarine Barnard said that this was the correct decision to protect its capital in the current cycle. She believed M&F will again begin paying a dividend at the end of this year after reviewing the investigation into its capital requirements.

In a response to his company's interim results, M&F chief executive Keith Kennedy said the investigation would be complete within two months, after which the short-term insurer would formulate its dividend policy.

Barnard said she expected M&F to do better in the second half of its financial year and turn the first-half loss around to break more or less even.

Source: Fin24.com

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