Boston, MA -- (ReleaseWire) -- 02/12/2014 -- We believe 2014 will be a challenging year for companies in both major segments. Lacklustre economic growth and stubbornly high inflation will crimp premium growth and profitability. In the non-life segment, competitive pressures in a fragmented marketplace should limit companies' ability to lift prices and rates. In the life segment, the main challenge is the maturity of the marketplace.
BMI's new insurance report format provides forecasts of the life and non-life markets, including gross and net premiums, reinsurance premiums and assets. Moreover, it provides forecasts for key growth drivers such as vehicle fleet size, demographic factors and private health expenditure. The report also contains a comprehensive breakdown of the non-life insurance market, providing forecasts for motor and transport insurance, property, personal accident, health, general liability and credit insurance. Finally, the new report offers a detailed breakdown of the life and non-life competitive landscapes, covering the top companies present in each segment by premiums and market share.
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We see limited growth potential in the life segment due to the fact that most South Africans who can afford the savings (and protection) solutions that are offered by the country's substantial and sophisticated insurers are already customers. We believe particular companies well benefit and see growth due to the development of products for low income groups - but the incremental business is not sufficient to lift overall premium growth into double digits.
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.
As of early 2014, the strengths of the world class (and predominantly indigenous) South African insurers are obvious. In the life segment, the main players have scale by any metric, along with advantages that include multi-channel distribution, targeted marketing strategies, capital strength and well recognised brand names. Many of the leading non-life companies have the advantages that come from affiliation with the major life groups or other financial services companies. In both major segments, companies are working actively to control costs in face of a fairly difficult economic environment. Innovative and resilient to emerging markets risk, many of the South African companies are developing products that are tailored for the needs of low income groups and/or are expanding into other countries in Sub-Saharan Africa.
Key BMI Forecasts
- We are forecasting total gross premiums to reach US$43.5bn over 2014.
- Life premiums are forecast to reach US$34.9bn over 2014.
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