Life insurers pay close to R500bn

• Asisa says sector is healthy, with double the legally required capital buffer

SA life insurers paid out more than half-a-trillion rand in benefit claims in 2020 as Covid-19 took a heavy toll. Claims and benefit payments to holders of life cover policies rose 6.5% to R522.7bn in 2020, up from the previous year’s R491bn, according to long-term insurance statistics released by the Association for Savings & Investment SA on Monday.

SA life insurers paid out more than half-a-trillion rand in benefit claims in 2020 as Covid-19 took a heavy toll.

Claims and benefit payments to holders of life cover policies rose 6.5% to R522.7bn in 2020, up from the previous year’s R491bn, according to long-term insurance statistics released by the Association for Savings & Investment SA (Asisa) on Monday.

The total claims and benefit payments include retirement annuity and endowment policy benefits as well as claims against life, disability, critical illness and income-protection policies.

“There was over half-atrillion rand that the industry contributed to consumers last year, so you can just imagine if that didn’t happen what would have been the impact on the financial stability of consumers,” Hennie de Villiers, deputy chair of Asisa’s life and risk board committee, said during a virtual media conference.

Asisa’s figures show the life industry recorded 434,216 death claims in 2020, or almost 37% more than the 317,442 claims in 2019. More than half of the claims in 2020 were for funeral policies (266,321) while the rest were for life policies, credit life policies and other policies providing life cover.

The increase in death claims “is not only related to Covid-19, it’s just a general increase”, De Villiers said. There were some Covid-19 elements in it “but it’s not only that”.

Asisa said the R522.7bn in life claims paid to policyholders in 2019 exceeded the R335.2bn set aside by the government in 2021 for social development.

The Covid-19 pandemic has prompted insurers such as Momentum Metropolitan and Old Mutual to increase their provisions for claims. Momentum Metropolitan last week set aside an additional R655m in provisions when it announced its results for the six months to end-December, adding to the R983m announced in its results for the year to end-June 2020.

Old Mutual said on Monday it expects profit to drop as much as 60% in the year to endDecember after it had to set aside almost R4bn to cover Covid-19-related claims.

Even so, Asisa says the life insurance industry remains healthy as it has more than double the legally required capital buffer in place.

The life industry as a whole held assets worth R3.23-trillion at the end of 2020, while liabilities amounted to R2.89-trillion. That leaves the industry with free assets of R333.5bn, which, though moderately down from the R373.5bn capital buffer it enjoyed in 2019, is still more than double the amount needed under the solvency capital requirements (SCR).

“Our industry remains well capitalised,” De Villiers said. “That the ratio of free assets to the SCR only reduced marginally from 2019 to 2020 is further evidence of the ability of the industry to withstand challenging circumstances.”

Asisa’s data also showed that the local collective investment schemes (CIS) industry attracted net annual inflows of R213bn in 2020, the highest in the industry’s 55-year history. Assets under management by the local unit trust industry rose to R2.73trillion in the year to endDecember 2020, meaning the sector has tripled its assets under management since December 2010 when total assets were R927bn.

SA’s CIS sector attracted R23bn of net inflows in the first quarter of 2020, followed by a record-breaking R88bn in the second quarter, R57bn in the third quarter and R44bn in the final three months of 2020.

But despite the recordbreaking inflows the majority of investors continued to favour more risk-averse portfolios.

Sunette Mulder, senior policy adviser at Asisa, said 46% of all assets in SA were held in multiasset class portfolios, while 35% were in low-risk interestbearing portfolios, 17% in equity portfolios and 2% in real estate.

International figures show 43% of CIS assets are in equity portfolios, which offer higher growth but are accompanied by greater risk.

THERE WAS OVER HALF-A-TRILLION RAND ... THE INDUSTRY CONTRIBUTED TO CONSUMERS LAST YEAR

Hennie de Villiers Asisa deputy chair: committee