Rocky road for insurers, but outlook still ‘stable’

1/27/2012 1:20:01 PM

RATINGS agency Fitch said yesterday it expected the performances of SA’s major life insurers to have remained strained in the second half of last year — reflecting volatile investment market conditions globally and the constraints on South Africans’ disposable incomes. South African insurers are in a closed period ahead of releasing their full-year and half-year results to December. Fitch said, however, that the rating outlook for the life insurers was “stable”, due to their resilience, strong and improved performances, robust capital levels and improved persistency levels — the percentage of insurance policies that are in force and do not lapse. Fitch assigned a AAA national long-term rating on Old Mutual Life Assurance, AA- for Sanlam and Liberty, and A+ for MMI. It said regulatory changes would likely affect local insurers in the future. It pointed to the fact that the government was proposing a National Social Security Fund that would make retirement savings compulsory. “Although the implementation date is uncertain, the government has indicated a phased implementation from 2015,” Fitch said. “Fitch believes the reform may have an adverse impact on life insurance companies as part of people’s current monthly retirement contributions into life insurers’ retirement saving products may be redirected to the national fund. “However, on the positive side, an opportunity exists for an insurer to be the administration service provider to the (fund).” Among other potential challenges Fitch noted was the Financial Advisory and Intermediary Services Act, which required brokers and agents to pass regulatory exams to sell insurance. “This act may have a negative impact on life insurers as it may result in lower new business volumes if the advisers fail to attain the required accreditation or if they move out of the insurance industry,” Fitch said. “In addition, there could be some disruption to sales levels in the near term, as advisers focus on studying for and taking the examinations.” There was also concern about the effect on insurers of the National Health Insurance, which is expected to be implemented this year. ndzamelap@bdfm.co.za

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