Despite the global economic crisis and the recession, it seems South Africa's insurance companies are doing fairly well. Santam, one of South Africa's the largest short-term insurers that offers car and home insurance, for instance reported a increased net profit of 202 percent to R332m in the first six months of 2009. This is a result of stronger investment and insurance fund returns, despite the underwriting return fell to R94m from R326m for the same period a year earlier.

Then there is Mutual & Federal, an Old Mutual subsidiary. This insurance company saw its attributable profit fall 7 percent to R137m in first half year of this year, after the under-writing deficit widened to R96m from R23m at the same time last year.

According to Keith Kennedy, MD at Mutual & Federal, the insurer had faced “one of the group’s most challenging periods in recent history, exacerbated by depressed demand and uncertainty in global financial markets”.

Metropolitan Asset Managers analyst Chris Naidoo added in an interview with Business Day that the insurance underwriting business cycle was at a low point and the question was whether the cycle would turn soon or continue to slide.

Mutual & Federal was particularly hurt by losses at Credit Guarantee, which had not made a loss for a number of years.

One of the main concerns is the affordability of car insurance, as vehicle insurance forms a big part of most insurers’ business. Car insurance for instance forms 40 percent of the operations at Mutual & Federal. In total, there are more than 8- million cars on South Africa’s roads, but estimates are that less than 30 percent are insured.

Source: Business Day