Insurers’ outlook ‘uncertain’
SOUTH Africa’s insurance industry has largely been protected by the performance of the sector’s investment portfolios, but it is severely threatened by a depressed macroeconomic environment and volatility among its major trading partners including China, the US and the euro zone.
Speaking on the sidelines of the presentation of the fifth edition of Banana Skins, the survey into risk factors facing the global and local insurance industries, PwC’s long-term insurance leader for Africa, Victor Muguto, said South Africa’s insurance industry could not grow as long as negative sentiment from these areas affected its performance.
“Our market was still performing well, relatively shielded from outside influences like interest rates and so on. In the last few months, China (in particular), which has brought increased volatility on our stock market, will affect South Africa; affect insurers,” Muguto said.
He said the outlook for the sector in the country was uncertain as long as the macroeconomic environment around the world was very depressed generally: there was very little growth in Europe, some level of growth in the US and a slowing down of growth in emerging markets including China.
“Our gross domestic product (GDP) has been going backwards from highs of 4 to 5 percent… now we are at a level of projections of 1.4 percent for 2015, maybe lower going into 2016. That in itself means its very difficult for insurers to grow unless they target new areas, new markets,” Muguto said.
Sanlam said its emerging markets division grew new business volumes by 34 percent, supported by a strong performance in Botswana and the first time contribution of acquisitions including MCIS Insurance in Malaysia, Enterprise General Insurance in Ghana and the Soras Group in Rwanda.
Old Mutual’s rest of Africa businesses grew profits by 31 percent, while Nedbank’s division experienced significant growth as a result of the acquisition of a 20 percent stake in Ecobank Transnational.