Regulated monopoly Sasria has enviable margins. We investigate.

Government-owned entities are often accused of being inefficient, not without reason. However, state-owned short-term insurer Sasria appears to be bucking the trend, reporting healthy profits while other, private sector companies, sometimes battle to turn a profit.

For example, Sasria's most recent income statement, for the year ended March 31 2008, shows an after-tax profit of R290m for insurance premiums of R556m, a margin of 52%. In comparison, it took Santam (JSE:SNT) premiums of R14.2bn to make an after-tax profit of R750m last year - a margin of 5.3%. Mutual and Federal (JSE:MAF) made a loss.

Sasria has been such a cash cow for government that it paid a dividend of R10.5bn. Its investment portfolio has grown to around R2.5bn.

An apartheid era creation, Sasria was formed to provide some protection against unrest such as riots. Today, its function is the same: it provides insurance against riots, strikes, labour disturbances and terrorism.

So what's the secret to the wide profit margin? Sasria has a legislated monopoly. In other words, other insurance companies are prohibited from providing the cover that Sasria does.

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