(Bloomberg) -- OUTsurance Group Ltd. shares surged to a record after the South African insurer that also has operations in Australia and Ireland said full-year profits jumped and that it will pay a special dividend.
Net income increased 36% to 4.06 billion rand ($230 million) in the year to end-June from the prior year, the Johannesburg-based company said in a statement Tuesday. A special dividend of 0.40 rand a share — owing to surplus funds in one of its units — will complement a total dividend of 1.74 rand, 29% more than a year earlier.
The stock climbed 8.9% to 55.99 rand at 2:05 p.m. in Johannesburg, the highest since OUTsurance took over Rand Merchant Investment Holdings Ltd.’s listing on the city’s bourse.
Gross written premiums in the property and casualty business grew 21% to 33.2 billion rand, driven by elevated inflation and high interest rates in its markets, and as new business performance improved.
“Our expectations for both Australia and South Africa are that premium inflation will moderate over the next 12 months in line with a more favourable inflationary and interest-rate outlook,” Chief Executive Officer Marthinus Visser said.
The group also got a boost from better reinsurance markets, which has in turn helped damp cost increases, Visser said.
Events such as Russia’s war in Ukraine as well as 2021 riots in South Africa that left at least 72 people dead and floods a year later placed pressure on reinsurers — the businesses that underwrite insurance companies — and forced them to scale back coverage. That had meant firms such as OUTsurance got saddled with higher reinsurance costs and lower risk protections.
OUTsurance will continue work on simplifying its business and will also focus on capitalizing on opportunities presented by the improving economic outlook in South Africa, which could reverse the absence of real economic growth over the last decade, Visser said.
An energy crisis and the collapse of rail, ports and other infrastructure — exacerbated by years of poor governance — have hamstrung Africa’s most industrialized economy. Gross domestic product expanded by an average of less than 1% over the past 10 years — less than needed to cut a 33.5% unemployment rate, among the world’s highest.
OUTsurance will also build on its new Ireland business and plans to break even in five years. Visser said.
It also plans to take over a 7.7% minority stake that its employees hold in its insurance business, and compensate them with shares in OUTsurance’s holding company instead, a process that should take about 18 months, Chief Financial Officer Jan Hofmeyr said.
(Updates with comments from CEO from fifth paragraph.)
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