SOUTH African insurers looking for growth in the rest of Africa need to move fast as they can expect strong competition from large European insurers chasing the same markets.
PwC long-term insurance leader for Africa, Victor Mugoto, said that large European insurers like AXA and Prudential have substantial balance sheets, sophisticated models and are experienced in pricing risk.
This gives them an advantage over local insurers who have tended to shy away from insuring infrastructure projects and rather let the business be written outside of Africa.
“There is a lot of development that needs to happen and we need to run very quickly because the European insurers, like AXA and Prudential, have very sophisticated models and are very experienced at underwriting more sophisticated risk, and they are very quick to get to those new risk areas.”
Sanlam, Old Mutual, Liberty and MMI are all expanding their operations on the rest of the continent, in search of growth as SA’s economy expands at a sluggish 1.5 per cent to 2 per cent.
Yet the rest of Africa’s contribution to the value of new business for the insurers decreased by 7% in 2014, said Dewald van den Berg, PwC director of the financial services division. This was partly due to currency fluctuations while competition also played a role, he added. Margins also reduced in the rest of Africa.
Only Sanlam was able to maintain its new business margins at the same level as the prior year, Mr van den Berg said.
Sanlam was also “ahead of the pack” with 22% of the value of new business coming from its rest of Africa operations.
Sanlam was also “ahead of the pack” with 22% of the value of new business coming from its rest of Africa operations.
The insurer has the largest operations in the rest of Africa, with businesses in 14 countries, excluding SA.
Sanlam has R2.5bn to spend on acquisitions in the rest of Africa or other emerging markets as it aims to earn 30% of net operating profit from outside SA by the end of 2015.
Old Mutual’s rest of Africa businesses made up 14% of the value of new business last year, said Mr van den Berg.
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