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South Africa Insurance Report Q1 2012
Market |
Finance and Banking |
Report Type |
Market Research |
Country |
South Africa |
Published |
31 January 2012 |
Number of Pages |
59 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
The latest results published by South Afric? s leading insurance companies in late 2011, in relation to the first nine months of the year, generally confirmed the trends that we highlighted in our Q411 report. Despite their absolute size and the central role played by life insurance products in South Africas organised savings system, the major companies generally reported strong growth in demand for long-term savings products.
Encouragingly, persistency rates are continuing to hold up. Profitability remains robust, partly because of lower lapse rates and partly because of initiatives undertaken by company managements. The major players continue to pursue opportunities in other markets of Sub-Saharan Africa (SSA). They have the overall strength and the appreciation of the risks involved to take a long view. For the time being, though, the other markets for life insurance in the region are very much smaller than South Africa.
It is not impossible that 2011 comes to be seen as the year in which the strengths of South Africas life insurers in a global context came to the fore. Because of the peculiar history of South Africa, they have enormous tolerance of emerging markets risk and particularly political risk. Compared to their counterparts in broadly comparable countries such as Taiwan (especially) or Israel, they have generally had to work with much smaller pools of organised savings. To a greater extent than their Taiwanese or Israeli peers, they have developed very substantial businesses in developed countries. Nevertheless, in contrast to many, often much larger, groups in Europe, they appear to have suffered little from the volatility in global financial markets in 2011. In short, the combination of absolute size, financial strength, world-class corporate governance and orientation towards emerging and embryonic markets has served South African companies very well.
The latest news from South Africas non-life insurers is less inspiring. Although net premiums, as reported by the regulator, achieved 14% year-on-year (y-o-y) growth in H111, the reports from the companies themselves tell a different story. Among the largest non-life companies, Santam and Mutual & Federal reported single-digit growth in gross written premiums through mid- and late 2011, while Zurich South Africas business shrunk as a result of a deliberate contraction of the portfolio. Even if our estimates for non-life premiums in 2011 as a whole turn out to be pessimistic, we see no catalyst for an unfavourable long-term trend: a steady decline in non-life penetration. Essentially, competitive pressure is driving prices downwards. In order to maintain or grow profitability, non-life insurers have had to work aggressively to contain claims costs, reduce operating expenses and exploit opportunities of scale.
The Financial Services Board (FSB)s solvency assessment and management (SAM) regime may require that some players strengthen their capital bases over the coming years. However, it is very difficult to imagine the problems will be insurmountable. More high-profile deals, following the merger that produced MMI Holdings, are a distinct possibility.
The latest results published by South Afric? s leading insurance companies in late 2011, in relation to the first nine months of the year, generally confirmed the trends that we highlighted in our Q411 report. Despite their absolute size and the central role played by life insurance products in South Africas organised savings system, the major companies generally reported strong growth in demand for long-term savings products.
Encouragingly, persistency rates are continuing to hold up. Profitability remains robust, partly because of lower lapse rates and partly because of initiatives undertaken by company managements. The major players continue to pursue opportunities in other markets of Sub-Saharan Africa (SSA). They have the overall strength and the appreciation of the risks involved to take a long view. For the time being, though, the other markets for life insurance in the region are very much smaller than South Africa.
It is not impossible that 2011 comes to be seen as the year in which the strengths of South Africas life insurers in a global context came to the fore. Because of the peculiar history of South Africa, they have enormous tolerance of emerging markets risk and particularly political risk. Compared to their counterparts in broadly comparable countries such as Taiwan (especially) or Israel, they have generally had to work with much smaller pools of organised savings. To a greater extent than their Taiwanese or Israeli peers, they have developed very substantial businesses in developed countries. Nevertheless, in contrast to many, often much larger, groups in Europe, they appear to have suffered little from the volatility in global financial markets in 2011. In short, the combination of absolute size, financial strength, world-class corporate governance and orientation towards emerging and embryonic markets has served South African companies very well.
The latest news from South Africas non-life insurers is less inspiring. Although net premiums, as reported by the regulator, achieved 14% year-on-year (y-o-y) growth in H111, the reports from the companies themselves tell a different story. Among the largest non-life companies, Santam and Mutual & Federal reported single-digit growth in gross written premiums through mid- and late 2011, while Zurich South Africas business shrunk as a result of a deliberate contraction of the portfolio. Even if our estimates for non-life premiums in 2011 as a whole turn out to be pessimistic, we see no catalyst for an unfavourable long-term trend: a steady decline in non-life penetration. Essentially, competitive pressure is driving prices downwards. In order to maintain or grow profitability, non-life insurers have had to work aggressively to contain claims costs, reduce operating expenses and exploit opportunities of scale.
The Financial Services Board (FSB)s solvency assessment and management (SAM) regime may require that some players strengthen their capital bases over the coming years. However, it is very difficult to imagine the problems will be insurmountable. More high-profile deals, following the merger that produced MMI Holdings, are a distinct possibility.
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