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RMI Sees Earnings Pressure After Good Weather Boosts 2018 Profit

Roxanne Henderson
People walk along the beach during sunrise at Bondi Beach in Sydney, Australia, on Monday, Jan. 23, 2017. Australia is leading a push to salvage a Pacific trade deal after U.S. President Donald Trump formally withdrew as a signatory to the 12-nation accord. Photographer: DALLAS KILPONEN/Bloomberg

Rand Merchant Investment Holdings Ltd., which owns stakes in insurers operating across the U.K., Australia and South Africa, is warning investors not to expect a repeat of the unusually low claims that boosted 2018 profit.

The Johannesburg-based investor on Tuesday reported a 15 percent increase in adjusted earnings in the 12 months through June even as economic growth in its main markets stuttered. South Africa tipped into its first recession since 2009 in the second quarter, Britain’s gross domestic product growth has been sluggish , while political turmoil in Australia has caused business confidence to slump to a two-year low.

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“We would’ve liked to say that the macroeconomic environment in South Africa and in the U.K. was going to be a deterrent or negative for growth, but it’s slightly more complicated than that,” RMI Chief Executive Officer Herman Bosman said. “The loss ratios are very low when you compare them to previous decades. It’s almost unprecedented. It’s difficult to grow the numbers when you’re so dependent on a low loss ratio as a profitability guidance.”

RMI’s Main Investments
OUTsurance 88.6%
Discovery 25%
MMI Holdings 26.2%
Hastings 29.9%
RMI Investment Managers 100%
Alpha Code 100%

A drop in motor-related claims and favorable weather conditions helped boost profit from OUTsurance, which will also pay a special dividend of 236 million rand ($16 million) to RMI, the company said in a statement. The unit’s Australian division Youi also paid its first dividend.

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New initiatives, such as Discovery Ltd.’s plans to start a bank by the end of the year, may also put a “strain” on earnings, the insurer said. MMI Holdings Ltd.’s plans to boost profit “will probably take a bit more time,” Bosman said.

RMI’s stock gained 2.2 percent to close at 39.75 rand in Johannesburg, giving the company a market value of 61 billion rand. The Johannesburg Stock Exchange’s main all-share index declined 1 percent.

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