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Follow on Google News | "South Africa Insurance Report Q1 2011" is now available at Fast Market ResearchFast Market Research recommends "South Africa Insurance Report Q1 2011" from Business Monitor International, now available
For non-life insurers, difficulties over the last year or so have come from the patchiness of the economic recovery, higher losses (sometimes as a result of one-off events) and fairly low underwriting margins by historical standards. The published results from the three largest non-life companies for H110 suggest that overall premiums have stagnated over the last two years or so. This indicates that 2009-2010 was a very different period to 2006-2007, when the non-life segment achieved double-digit growth. Nevertheless, if BMI's forecasts for economic growth in South Africa turn out to be accurate, and our prediction of a moderate rise in non-life penetration comes to fruition, the segment could return to double-digit growth from 2012. Conversely, the figures from the Association for Savings and Investment South Africa (ASISA), the trade association for South Africa's life insurance companies and asset managers, suggest that 2010 may be seen as something of a year of respite after a very challenging 18 months to the end of 2009.The good news is that financial markets have been far less volatile than they were in Q408 and Q109. The bad news is that customers have become risk averse. In its South African Insurance Industry Survey 2010, KPMG notes that sales of single premium products have fallen. The lapse rate has also continued to rise. It appears that life premiums increased by about 8% in the year as a whole. This is a marked, positive turnaround after 2009 and an outcome that is in line with the trend that prevailed prior to 2008. Concentration In The Market Although none mention it, it is possible that the structure of the market has helped participants to maintain prices and margins compared to what they might have been. Both the life and non-life segments continue to be dominated by companies from South Africa's large domestic financial services groups. In the life segment, the largest players are Old Mutual (the owner of Nedbank and much else) and Sanlam. In the non-life segment, Mutual & Federal, Santam and the local operations of Zurich account for nearly 40% of total premiums. Absa has non-life and life subsidiaries. FirstRand Group is represented by Momentum Group (life insurance) and OUTsurance (non-life). Standard Bank owns Liberty Group, a major life player. Nevertheless, there are several substantial independent companies, including Discovery, which focuses on health insurance, Metropolitan and Hollard, a private company expanding into Australia and elsewhere. A key development in the life segment has been the proposed merger of Metropolitan with Momentum. Metropolitan will make an all-share purchase of Momentum. FirstRand will then distribute its shares in Metropolitan/ The responses to a challenging year vary. However, in general the impact of the downturn on profits was softened by at least one of the following: lower claims; lower administrative costs; corporate restructuring to emphasise more profitable lines and businesses; restructuring to reduce volatility of earnings; growth in healthcare products (thanks partly to the Government Employees Medical Scheme, GEMS); foreign expansion (usually into embryonic markets elsewhere in Sub-Saharan Africa, but also into Australia's non-life segment); and, perhaps most importantly, higher investment earnings. Of the insurers that emphasise niche businesses, it is possible that the one affected least by the downturn was Guardrisk, part of Alexander Forbes (a broker of short-term insurance and provider of various risk management solutions). Guardrisk is one of the world's leading providers of captive cell solutions to its clients. Guardrisk grew by virtually all measures in the year to the end of March 2009 as its customers sought the advantages of underwriting their own risks through captives. For more information or to purchase this report, go to: - http://www.fastmr.com/ About Business Monitor International Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at http://www.fastmr.com/ About Fast Market Research Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156. # # # Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available. End
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