Life industry faces bumpy ride in 2002
The latestKPMGInsurance Industry Survey has predicted that 2002 will be a tough year for the life insurance industry, due mainly to weakening equity markets causing investor uncertainty.
The survey, detailing results over the 2000-01 period, shows that total life insurance premiums decreased by 4.6 per cent in 2001, making it the first year of negative growth in over a decade.
KPMG claims this decrease was due primarily to investor uncertainty post-September 11, causing a slowing in the flow of funds to life insurers, though net premium flows were still positive as policy claims and surrenders declined.
Reported investment revenue for life insurers also fell, down by 56.7 per cent over the period as a result of market volatility.
KPMG expects this trend to continue over the 2001-02 period as markets have continued to falter.
“We expect that premiums will continue to rise, reinsurance will become more difficult and expensive to place, and life insurers and fund managers will continue to come under pressure as a result of a projected poor investment climate,” KPMG insurance group partner Andries Terblanche says.
Total shareholder profit during the period increased from $2.8 billion to $3.8 billion for the life insurers surveyed, and shareholder fund profits increased from $543 million in 2000 to $2.3 billion in 2001.
Though this result appears strong, KPMG has suggested that this needs to be carefully analysed, as the impact of revaluation gains on controlled entities held in the life insurers shareholders’ funds have obscured a subdued operating performance.
The survey also shows that shareholder entitlements to profits earned from life statutory funds reduced from $2.278 billion in 2000 to $1.453 billion in 2001.
Figures detailing market share in the life insurance industry, based on gross premiums and deposits, show the industry has remained fairly stable.
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