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INSURANCE: Life InsurersÂ’ Confidence Levels Remain Solid in 2012
Recent Gauteng Business News
In its quarterly survey, Ernst and Young reports that life insurance confidence remained robust in the first quarter of 2012, at 93 index points. This follows a strong 2011, when confidence of life insurers remained at or above the 90 mark. This indicates that nine out of ten life insurers were satisfied with business conditions through 2011, and into the first quarter of 2012.
Tim Rutherford,
Life Insurance spokesperson at Ernst and Young points out that life insurance
confidence levels continue to be the strongest in the financial services
sector, despite a strong revival in banking confidence in the first quarter. He
points out that bank confidence is now much closer to life insurance confidence
than it has been for a while.
This is the 35th
quarterly survey measuring confidence in the life insurance industry. The
research is conducted by the Bureau for Economic Research in Stellenbosch.
Tim Rutherford
continues; ‘the strong confidence is in line with the largely impressive
financial reporting season, where all the major insurers reported generally
strong financials. An analysis of the results indicates that it was a
combination of strong equity markets, supporting investment gains, coupled with
stable investment income, on the one hand, and reasonably solid growth in
premium income on the other.Â’
Life Insurers Place Emphasis on Retaining Premiums
He adds, ‘this has largely carried over into
2012, with life insurers indicating that premium income growth remains solid,
and with particularly strong investment income growth. Investment income is
largely correlated with strong equity markets, which have also seen
considerable gains into the first quarter.Â’
‘In addition,’
he notes, ‘a lot of emphasis has been placed on retaining premiums that might
otherwise be paid out. Life insurers have not only been more selective in the
new business that they write (which helps reduce lapse rates), but are also
keeping a tight lid on surrenders. There has long been a focus on minimising
policy surrenders, since this has historically been a considerable drain on
company assets. The last few quarters have seen a noticeable slowdown in the
rate of growth in policy surrenders, and this is no doubt as a result of strong
client retention efforts, which most of the major life offices are focusing
on.Â’
Other survey findings
include:
· A slowdown in investment product growth, albeit after a
very strong fourth quarter.
· Sustained profitability of risk-based products, which
improved through 2011.
· A sharp slowdown in administration expenses growth, after
strong growth in 2011.
· A reduction in headcount for the second consecutive
quarter.
· Considerably slower profits growth in the first quarter,
despite sharply lower administration cost growth.
Rutherford
comments, ‘Through the recent reporting season, all life offices focused on the
need to improve efficiencies, in line with improving their new business
margins. The last two quarters have seen reductions in the headcount to support
this need. Most life companies reported an improvement in their margins through
2011, and continued efficiency improvement drives have resulted in an improved
administration ratio in the first quarter of 2012 too.Â’
Rutherford
concludes; ‘the fundamentals for life insurers remain solid. Although profit
growth slowed in the first quarter, investment income remains strongly
positive, and continues to compliment premium income growth. With life insurers
focused on extracting earnings from improved efficiencies, they expect to see
continued profits growth into the next quarter, with sustained strong growth in
all categories of income.Â’
Business News Sector Tags: Insurance|