Global Credit Rating Co. Insurance Industry Overview July 2006
Salient features Premium Claims Underwriting Property and motor classes Investment income Returns Market share
Premium income
Premium income
Premium income GPI growth – slowed to 12% in 2005, from an average of 19% in the previous 2 years. Reinsurance ratio – still decreasing (2005: 28%) Historical growth drivers include: property, vehicle sales. Rates under pressure 2H 2005; 1H 2006
Claims trends
Claims trends Declining trend previously, but… Increase in earned loss ratio from 59% to 63% Relatively benign weather, but claims normalising Exceptional claims ratios from the atypical insurers, such as CGIC; Guardrisk; Nova; Lombard etc Excluding atypicals – earned loss 2005: 65% (2004: 62%)
Underwriting trends Underwriting margin peaked at 11% in 2004, but contracted to 8.6% in 2005 – led by the property class Property class underwriting margin contracted sharply to 7.4% in 2005 from 14% previously Underwriting surplus totaling around R2.5bn, down from R2.8bn in 2004
Underwriting
Motor class
Motor class GPI increased from R13.7bn to R15.8bn – 15% growth Largest class - accounting for 38% of total industry premium Earned loss ratios deteriorated from 67% in 2004 to 71% - normalisation of claims; rates Underwriting starting to deteriorate
Property class
Property class GPI increased from R11.9bn to R13.2bn – 11% growth Property class premium accounted for 32% of industry premium Pricing pressure particularly in the “mega corporates” and prestige accounts in 2005 Underwriting coming under pressure, but still profitable Commercial rates starting to decline in 1H 2006
Investment income Buoyant market conditions – particularly equities in 2H 2005 and 1H 2006 Realised investment income increased by 17% to R2.1bn Significant unrealised gains
Returns
Market share Gainers Outsurance 4.8% (from 4.1%) Dial direct 0.7% Guardrisk 5.3% (from 4.9%) ABSA 3.7% (from 3.1%) Auto & General 3.9% (from 3.2%)
Market share Losers AIG - 2.8% (from 4.3%) Mutual & Federal – 18.1% (from 19.9%) SA Eagle – 8.3% (from 8.6%)
Market share
Global Credit Rating Co. Thank you July 2006