Boston, MA -- (SBWIRE) -- 12/19/2012 -- Key Insights And Key Risks
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).
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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:
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