1. Global Credit Rating Co.
Insurance Industry Overview
July 2006

2. Salient features Premium Claims Underwriting
Property and motor classes
Investment income
Returns
Market share

3. Premium income

4. Premium income

5. 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

6. Claims trends

7. 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%)

8. 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

9. Underwriting

10. Motor class

11. 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

12. Property class

13. 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

14. 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

15. Returns

16. 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%)

17. Market share Losers AIG - 2.8% (from 4.3%)
Mutual & Federal – 18.1% (from 19.9%)
SA Eagle – 8.3% (from 8.6%)

18. Market share

19. Global Credit Rating Co.
Thank you
July 2006