South Africa Insurance Report Q4 2012
Business Monitor International, October 2012, Pages: 74
The South Africa Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's insurance industry.
This South Africa Insurance Report considers the prospects for both life and non-life insurers in the country. The latest results published by South Africa’s life companies relate to 2011 and H112 and highlight their strengths and competitive advantages in a global context. Most have benefited from at least some of the following factors: rising demand for long-term savings products from ‘retail mass’
customers; development of new products; realisation of benefits of long-standing programs to boost the profitability of the products that are sold, and synergies from combinations of businesses. Unlike their counterparts in other countries, they appear to have suffered relatively little from the volatility in global financial markets, which intensified through H211. In general, they are upbeat about the prospects of
(much) smaller new businesses in other countries throughout Sub-Saharan Africa (SSA).
Because of the peculiar history of South Africa, the life companies have enormous tolerance of emerging markets risk and particularly political risk. Compared with 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. 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.
Longer-term trends in the non-life segment are less inspiring. The leading players’ comments in relation to H112 suggest that premiums will grow at single-digit rates over the year as a whole. We see no reason for non-life penetration to stop falling over the medium term. The non-life companies are working assiduously to control claims costs, boost productivity, develop new products, exploit economies of scale and, if possible, grow by acquisition. Like their counterparts in the life segment, they are looking at opportunities outside South Africa. However, for the medium term, they will likely continue to face downwards pressures on prices.
Overall, the strengths of both segments mean we are optimistic about the medium- to long-term prospects of South Africa’s dynamic insurance sector. The Financial Services Board (FSB)’s solvency assessment and management (SAM) regime may require some players to strengthen their capital bases over the coming years. However, it is very difficult to imagine the problems will be insurmountable. We remain of the view that more high-profile deals, following the merger that produced MMI Holdings, could well occur.
Over the last quarter, BMI has made the following changes:
- The analysis incorporates BMI’s latest forecasts for South Africa’s economy, including details in relation to auto sales and trends in the healthcare sector.
- The analysis incorporates the latest comments on developments of leading local insurers.
Executive Summary 5
Table: Total Premiums, 2008-2016 5
Key Insights And Key Risks 5
SWOT Analysis 7
South Africa Insurance Industry SWOT 7
South Africa Political SWOT 8
South Africa Economic SWOT 8
South Africa Business Environment SWOT 9
Life Sector 10
Table: Middle East And Africa Life Premiums, 2008-2016 (US$mn) 10
South Africa Life Sector 10
Life Insurance Industry Forecast Scenario 14
Table: Ttotal Life Premiums, 2009-2016 14
Growth Drivers And Risk Management Projections 15
Population 15
Table: Insurance Key Drivers, Demographics, 2008-2016 15
Non-Life Sector 17
Table: Middle East And Africa Non-Life Premiums, 2008-2016 (US$mn) 17
South Africa Non-Life Sector 17
Non-Life Insurance Industry Forecast Scenario 20
Table: Total Non-Life Premiums, 2009-2016 20
Growth Drivers And Risk Management Projections 21
Macroeconomic Outlook 21
Table: South Africa Economic Activity, 2011-2016 24
Political Stability Outlook 24
Table: Middle East And Africa Defence And Security Ratings 26
Healthcare 26
Epidemiology 28
Table: Insurance Key Drivers, Disability-Adjusted Life Years, 2008-2016 29
Motor 30
Islamic Finance 32
Insurance Risk/Reward Ratings 33
Table: South Africa’s Insurance Risk/Reward Ratings 33
Table: Middle East And Africa Insurance Risk/Reward Ratings 34
Competitive Landscape 35
Major Players In South Africa’s Insurance Sector 35
Company Profiles 37
AIG 37
Allianz 41
Hollard 44
Liberty Holdings 47
MMI Holdings 50
South Africa Insurance Report Q4 2012
© Business Monitor International Ltd
Page 4
Old Mutual Group 54
Sanlam Group 59
Zurich South Africa 64
Table: South Africa’s Population By Age Group, 1990-2020 (‘000) 67
Table: South Africa’s Population By Age Group, 1990-2020 (% of total) 68
Table: South Africa’s Key Population Ratios, 1990-2020 69
Table: South Africa’s Rural And Urban Population, 1990-2020 69
BMI Methodology 70
Insurance Risk/Reward Ratings 71
Table: Insurance Risk/Reward Indicators And Rationale 72
Table: Weighting Of Indicators 73
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