FINANCIAL SERVICES BOARD INSURANCE DIVISION

FINANCIAL SERVICES BOARD INSURANCE DIVISION THE QUARTERLY REPORT ON THE RESULTS OF THE LONG-TERM INSURANCE INDUSTRY FOR THE PERIOD ENDED 31

TABLE OF CONTENT SPECIAL REPORT ON THE RESULTS OF THE LONG-TERM INSURANCE INDUSTRY...3 Summary of the results of the primary long-term insurance industry (excluding reinsurers) for the years ended to and the first 3 months of :...3 Industry results - Typical insurers (typical insurers, for the purpose of this report, are those insurers who offer most of the six classes of business as defined in the act, in the primary market)....6 Industry results - Niche insurers (niche insurers, for the purpose of this report, are those insurers who conduct business in a specific target market)....9 Industry results - Cell captive insurers (cell captive insurers, for the purpose of this report, are those insurers who conduct business on a cell captive basis only)... 12 Industry results - Linked investment insurers (linked investment insurers, for the purpose of this report, are those insurers who underwrite policies whereby the value of the policy is directly linked to the value of the assets invested in, and no guarantees are offered).... 15 Industry results Reinsurers (reinsurers, for the purpose of this report, are those insurers who conduct only professional reinsurance and are not involved in marketing to the public).... 18 Industry results - Assistance insurers (assistance insurers, for the purpose of this report, are those insurers who offer life policies where the sum assured does not exceed R18 000).... 21

SPECIAL REPORT ON THE RESULTS OF THE LONG-TERM INSURANCE INDUSTRY Summary of the results of the primary long-term insurance industry (excluding reinsurers) for the years ended to and the first 3 months of : a 3 months ended Gross premium R m 300 650 358 967 107 060 Reinsurance R m 16 005 16 443 5 173 Net premiums- Recurring R'm 106 918 124 089 33 427 Net premiums- Non-recurring R'm 178 065 218 434 67 837 Net claims paid R m 238 240 291 739 83 490 Total assets R m 1 724 004 2 000 555 2 082 423 Total liabilities R m 1 626 011 1 869 144 1 952 042 CAR amount (after management action) R m 35 485 36 697 37 016 Number of policies at the end of period 42 005 582 49 547 299 48 173 423 Number of schemes at the end of period 53 202 54 041 53 632 Performance indicators: Net premium increase (year to year) % 7 20 12 Claims (as % of net premiums) 84 85 82 Commission (as % of net premiums) 5 4 3 Management Expenses (as % of net premiums) 10 10 8 Number of policies increase (yr to yr) % 18 18 9 Individual lapse %** 22 19 49 Individual lapses % (in-force policies) 4 3 3 Individual termination %** 21 37 9 Individual termination % (in-force policies) 4 7 1 Individual contractual termination %** 29 46 32 Individual expiry %** 0 0 2 Fund & group schemes termination %** 91 86 99 CAR cover ratio (median) 2.6 2.5 2.3 a During, there was reclassification of companies. As a result one niche insurer was reclassified as a typical insurer. * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of typical insurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for primary insurers (excluding reinsurers) for the long-term insurance industry were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 205 790 12 221 377 11 226 856 11 Government and semi-government 191 549 11 173 874 9 171 664 8 Equities and collective investment schemes 862 648 50 1 221 629 61 1 269 768 61 Debentures and loan stock 128 379 7 176 585 9 181 657 9 Immovable properties 58 833 3 58 152 3 57 763 3 Fixed assets 181 838 11 2 112 0 2 171 0 Debtors 94 965 6 118 589 6 141 669 7 Other assets - - 28 235 1 30 873 1 Total 1 724 004 100 2 000 555 100 2 082 423 100

CAR cover ratios - primary insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the primary insurers: Number of insurers FREE ASSETS TO CAR 2008 2009 2010 Covered 0-1 times 3 1 3 2 0 0 Covered 1-2 times 23 20 22 27 26 25 Covered 2-5 times 26 32 30 29 27 26 Covered 5-10 times 13 10 11 12 15 16 Covered 10+ times 2 4 3 2 2 2

Industry results - Typical insurers (typical insurers, for the purpose of this report, are those insurers who offer most of the six classes of business as defined in the act, in the primary market). b 3 months ended Gross premium R m 193 955 233 619 57 593 Reinsurance R m 13 393 15 024 4 091 Net premiums- Recurring R'm 101 024 116 817 30 590 Net premiums- Non-recurring R'm 79 538 101 778 22 911 Net claims paid R m 165 954 189 747 44 849 Total assets R m 1 285 742 1 474 993 1 523 385 Total liabilities R m 1 594 544 1 348 799 1 398 623 CAR amount (after management action) R m 33 972 34 866 35 089 Number of policies at the end of period 37 548 088 44 297 690 41 988 937 Number of schemes at the end of period 47 917 48 811 48 342 Performance indicators: Net premium increase (year to year) % 2 21 (3) Claims (as % of net premiums) 92 87 84 Commission (as % of net premiums) 7 6 6 Management Expenses (as % of net premiums) 15 13 14 Investment yield %* 7 14 4 Number of policies increase (yr to yr) % 5 20 5 Individual lapse %** 59 53 50 Individual lapse % (in-force policies) 3 3 3 Individual termination %** 11 9 9 Individual termination % (in-force policies) 4 7 1 Individual contractual termination %** 12 20 19 Individual expiry %** 2 1 2 Fund & group schemes termination %** 91 86 99 CAR cover ratio (median) 2.6 2.7 2.6 b During, there was reclassification of companies. As a result one niche insurer was reclassified as a typical. * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of typical insurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for typical insurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 143 254 11 159 776 11 159 610 10 Government and semi-government 147 131 11 110 622 7 109 744 7 Equities and collective investment schemes 623 864 49 903 616 61 945 770 62 Debentures and loan stock 112 544 9 155 445 11 154 078 10 Immovable properties 58 822 5 58 135 4 57 745 4 Fixed assets 135 247 11 2 096 0 2 146 0 Debtors 64 879 5 83 858 6 92 360 6 Other assets - - 1 446 0 1 931 0 Total 1 285 742 100 1 474 993 100 1 523 385 100

CAR cover ratios - Typical insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the typical insurers: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 1 0 2 1 0 0 Covered 1-2 times 8 8 7 10 10 8 Covered 2-5 times 17 16 16 17 15 17 Covered 5-10 times 2 3 3 2 5 4 Covered 10+ times 1 1 1 1 1 1

Industry results - Niche insurers (niche insurers, for the purpose of this report, are those insurers who conduct business in a specific target market). 3 months ended Gross premium R m 1 957 2 676 1 418 Reinsurance R m 140 113 26 Net premiums- Recurring R'm 1 402 1 979 563 Net premiums- Non-recurring R'm 415 583 116 Net claims paid R m 1 026 1 062 264 Total assets R m 11 233 12 505 12 927 Total liabilities R m 18 286 11 371 11 748 CAR amount (after management action) R m 170 248 264 Number of policies at the end of period 1 185 061 1 591 201 1 525 846 Number of schemes at the end of period 1 232 1 153 1 191 Performance indicators: Net premium increase (year to year) % 41 19 (20) c Claims (as % of net premiums) 56 41 39 Commission (as % of net premiums) 5 6 6 Management Expenses (as % of net premiums) 17 17 17 Investment yield %* d 9 19 6 Number of policies increase (yr to yr) % (25) 32 5 Individual lapse %** 62 9 6 Individual lapse % (in-force policies) Individual termination %** 7 12 1 17 11 7 Individual termination % (in-force policies) 14 6 1 Individual contractual termination %** 32 22 6 Individual expiry %** 39 25 9 Fund & group schemes termination %** 315 70 179 CAR cover ratio (median) 5.9 5.4 5.3 c During, there was reclassification of companies. As a result one niche insurer was reclassified as typical. * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of niche insurers for the first 3 months of as well as comparative figures for the first 3 months of : Note: The change in the spread of premium was a result of one niche insurer reclassified as a typical insurer during. Investment spread The spread and categories of assets for niche insurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 1 507 13 1 775 14 1 746 14 Government and semi-government 3 852 34 4 796 38 4 774 37 Equities and collective investment schemes 3 954 35 4 439 35 4 656 36 Debentures and loan stock 222 2 253 2 257 2 Immovable properties 0 0 0 0 0 0 Fixed assets 1 225 11 1 0 2 0 Debtors 473 4 403 3 539 4 Other assets - - 837 7 953 7 Total 11 233 100 12 505 100 12 927 100

CAR cover ratios - Niche insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the niche insurers: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 0 0 0 0 0 0 Covered 1-2 times 2 1 1 1 0 2 Covered 2-5 times 1 4 3 3 4 2 Covered 5-10 times 5 4 4 5 5 5 Covered 10+ times 0 1 1 1 1 1

Industry results - Cell captive insurers (cell captive insurers, for the purpose of this report, are those insurers who conduct business on a cell captive basis only). 3 months ended Gross premium R m 4 086 5 399 1 178 Reinsurance R m 252 529 127 Net premiums- Recurring R'm 3 143 3 800 997 Net premiums- Non-recurring R'm Net claims paid R m Total assets R m Total liabilities R m CAR amount (after management action) R m Number of policies at the end of period Number of schemes at the end of period Performance indicators: 691 1 070 54 1 130 1 193 241 6 361 7 754 7 906 8 656 6 240 6 256 260 254 257 1 987 186 2 404 377 2 564 444 111 88 132 Net premium increase (year to year) % 83 27 (6) Claims (as % of net premiums) 29 25 23 Commission (as % of net premiums) 8 9 11 Management Expenses (as % of net premiums) 13 13 17 Investment yield %* e 8 8 2 Number of policies increase (yr to yr) % 23 13 21 Individual lapse %** Individual lapse % (in-force policies) Individual termination %** Individual termination % (in-force policies) Individual contractual termination %** Individual expiry %** 40 41 57 12 3 1 25 9 8 1 1 0.4 2 2 4 (4) 8 13 Fund & group schemes termination %** 204 267 10 CAR cover ratio (median) 5.0 4.6 5.9 e * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of cell insurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for cell insurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 3 744 59 4 687 60 4 989 63 Government and semi-government 1 216 19 1 227 16 1 431 18 Equities and collective investment schemes 373 6 974 13 964 12 Debentures and loan stock 12 0 15 0 21 0 Immovable properties 0 0 0 0 0 0 Fixed assets 0 0 0 0 0 0 Debtors 1 015 16 801 10 448 6 Other assets - - 49 1 52 1 Total 6 361 100 7 754 100 7 906 100

CAR cover ratios - Cell insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the niche insurers: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 0 0 0 0 0 0 Covered 1-2 times 2 1 1 1 2 1 Covered 2-5 times 4 5 3 3 2 1 Covered 5-10 times 1 0 2 3 3 5 Covered 10+ times 0 1 1 0 0 0

Industry results - Linked investment insurers (linked investment insurers, for the purpose of this report, are those insurers who underwrite policies whereby the value of the policy is directly linked to the value of the assets invested in, and no guarantees are offered). 3 months ended Gross premium R m 99 551 115 625 45 626 Reinsurance R m 2 191 696 876 Net premiums- Recurring R'm 58 66 70 Net premiums- Non-recurring R'm 97 301 114 863 44 680 Net claims paid R m 69 405 99 198 37 937 Total assets R m 419 424 503 724 536 430 Total liabilities R m 3 562 501 505 534 013 CAR amount (after management action) R m 976 1 220 1 291 Number of policies at the end of period 108 606 116 455 118 162 Number of schemes at the end of period 4 566 4 838 4 781 Performance indicators: Net premium increase (year to year) % 14 18 40 Claims (as % of net premiums) 71 86 80 Commission (as % of net premiums) 0 0 0 Management Expenses (as % of net premiums) 2 2 1 Investment yield %* f 9 15 5 Number of policies increase (yr to yr) % 22 6 7 Individual lapse %** 14 20 10 Individual lapse % (in-force policies) 2 4 1 Individual termination %** 8 22 11 Individual termination % (in-force policies) 8 1 1 Individual contractual termination %** 31 7 7 Individual expiry %** 2 1 0 Fund & group schemes termination %** 58 85 79 CAR cover ratio (median) 1.7 1.6 1.6 f * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of linked insurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for linked insurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 57 001 14 54 863 11 60 268 11 Government and semi-government 39 328 9 57 202 11 55 687 10 Equities and collective investment schemes 233 978 56 311 985 62 317 594 60 Debentures and loan stock 15 232 4 20 327 4 26 715 5 Immovable properties 8 0 13 0 14 0 Fixed assets 45 360 11 10 0 18 0 Debtors 28 517 7 33 432 7 48 218 9 Other assets - - 25 891 5 27 916 5 Total 419 424 100 503 724 100 536 430 100

CAR cover ratios - Linked insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the linked sector: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 1 0 0 0 0 0 Covered 1-2 times 5 6 9 10 12 12 Covered 2-5 times 2 3 4 4 2 2 Covered 5-10 times 5 3 2 1 1 1 Covered 10+ times 1 1 0 0 0 0

Industry results Reinsurers (reinsurers, for the purpose of this report, are those insurers who conduct only professional reinsurance and are not involved in marketing to the public). 3 months ended Gross premium R m 7 636 7 863 2 165 Reinsurance R m 1 029 1 081 384 Net premiums- Recurring R'm 6 481 6 542 1 400 Net premiums- Non-recurring R'm Net claims paid R m Total assets R m Total liabilities R m CAR amount (after management action) R m Performance indicators: 126 240 381 4 383 4 956 1 270 9 342 13 560 14 042 15 399 11 235 11 620 466 607 584 Net premium increase (year to year) % 28 3 20 Claims (as % of net premiums) 52 73 71 Commission (as % of net premiums) 6 7 8 Management Expenses (as % of net premiums) 6 7 6 Investment yield %* g 6 7 1 Number of policies increase (yr to yr) % - - - Individual lapse %** Individual termination %** Individual contractual termination %** Individual expiry %** - - - - - - - - - - - - Fund & group schemes termination %** - - - CAR cover ratio (median) 2.7 3.5 3.5 g * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of reinsurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for reinsurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 1 725 18 1 179 9 2 586 18 Government and semi-government 5 953 64 6 490 48 6 341 45 Equities and collective investment schemes 49 1 85 1 64 0 Debentures and loan stock 404 4 1 088 8 518 4 Immovable properties 0 0 0 0 0 0 Fixed assets 10 0 14 0 16 0 Debtors 1 201 13 1 955 14 1 851 13 Other assets - - 2 750 20 2 666 19 Total 9 342 100 13 560 100 14 042 100

CAR cover ratios - Reinsurers insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the reinsurance sector: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 0 1 0 0 0 0 Covered 1-2 times 1 1 0 1 2 1 Covered 2-5 times 5 5 7 6 4 5 Covered 5-10 times 0 0 0 0 1 1 Covered 10+ times 0 0 0 0 0 0

Industry results - Assistance insurers (assistance insurers, for the purpose of this report, are those insurers who offer life policies where the sum assured does not exceed R18 000). 3 months ended Gross premium R m 1 440 1 648 596 Reinsurance R m 29 81 25 Net premiums- Recurring R'm 1 291 1 427 502 Net premiums- Non-recurring R'm 120 140 69 Net claims paid R m 725 539 199 Total assets R m 1 244 1 579 1 775 Total liabilities R m 963 1 229 1 402 CAR amount (after management action) R m 107 109 115 Number of policies at the end of period 1 176 641 1 137 576 1 976 034 Number of schemes at the end of period 4 053 4 077 4 099 Performance indicators: Net premium increase (year to year) % 32 11 51 Claims (as % of net premiums) 51 34 35 Commission (as % of net premiums) 13 9 11 Management Expenses (as % of net premiums) 26 26 25 Investment yield %* h 7 12 3 Number of policies increase (yr to yr) % 56 7 89 Individual lapse %** 27 33 5 Individual lapse % (in-force policies) 24 10 3 Individual termination %** 21 18 3 Individual termination % (in-force policies) 3 1 0 Individual contractual termination %** 2 3 0 Individual expiry %** 4 36 8 Fund & group schemes termination %** 186 108 79 CAR cover ratio (median) 1.8 2.4 2.3 h h * Return on investment is calculated according to the formula R=2i/A+B-i where i is all investment income plus realised and unrealised surplus on sale of investments, A is initial value of investments and B is end value of investments. **Expressed as a percentage of the number of new policies issued during the period.

Classes of policies These diagrams indicate the net premiums according to the classes of policies of assistance insurers for the first 3 months of as well as comparative figures for the first 3 months of : Investment spread The spread and categories of assets for assistance insurers for the years ended to and for the first 3 months of were as follows: Kinds of assets 3 months ended In South Africa: R million % R million % R million % Cash and deposits 284 23 276 17 243 14 Government and semi-government 22 2 27 2 28 2 Equities and collective investment schemes 479 39 615 39 784 44 Debentures and loan stock 369 30 545 35 586 33 Immovable properties 3 0 4 0 4 0 Fixed assets 6 0 5 0 5 0 Debtors 81 7 95 6 104 6 Other assets - - 12 1 21 1 Total 1 244 100 1 579 100 1 775 100

CAR cover ratios - Assistance insurers The ratio of surplus assets to capital adequacy requirement (CAR) gives an indication of the financial strength of a long-term insurer. The following table gives an indication of the financial strength of the assistance sector: FREE ASSETS TO CAR 2008 2009 Number of insurers 2010 Covered 0-1 times 1 1 1 1 0 0 Covered 1-2 times 6 4 4 5 2 2 Covered 2-5 times 2 4 4 2 4 4 Covered 5-10 times 0 0 0 1 1 1 Covered 10+ times 0 0 0 0 0 0