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Send  Share  RSS  Twitter  21 Jan 2010

INVESTMENTS: Life Insurance Confidence Boosted


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Life Insurance confidence continued to rise from its weakest levels – recorded at the end of 2008, after investor sentiment and stronger equity markets in the 4th quarter of 2009 helped push their financial fundamentals upwards.

In a quarterly survey, the results of which were released today, Ernst & Young reports that life insurance confidence rose from 58 index points in the previous quarter to its current level of 71. This means that close on three quarters of life insurers were satisfied with business conditions in the fourth quarter of 2009.

This is the 26th quarterly survey measuring confidence in the life insurance industry. The research is conducted by the Bureau for Economic Research in Stellenbosch.

Comments Tim Rutherford, Ernst and Young’s Life Insurance sector spokesperson, ‘ Life insurance confidence has improved throughout 2009, despite a weak economy and struggling consumer expenditure. The latter half of 2009 was driven largely by revived equity markets, which have certainly aided life insurers’ income levels.’

He continues, ‘ The first half of 2009 saw sharply reduced investment income for the industry. This led to profit contractions, and in some cases even losses. However, this was to some extent offset by relatively buoyant premium income flows.

The second half of 2009 saw a reversal of this trend, where revived investment income trends offset slowing premium income growth.

In fact’, says Rutherford, ‘premium income contracted in the fourth quarter of 2009, indicating that the slow economic growth is starting to hurt the life insurance sector’s ability to attract new funds.’

Survey findings indicate that there were:

· sharp contractions in investment product inflows;

· further weakness in risk contract profitability;

· contractions in new business premium growth;

· an improvement in the lapse and termination rate; and

· sustained low surrenders.


The combination of improvements in investment income offset the impact of the contracting premium income trends and deteriorating risk contract profitability, resulting in life insurers experiencing an improvement in the net profit losses in the fourth quarter.


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