138 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

Kashmira Naran
Partner
Insurance
Tel: +27 82 710 7629
Email: [email protected]
 The South African Insurance Industry Survey 2022 - proudly published for more than twenty years | 139

Reinsurance industry results

I have been authoring the reinsurance industry results analysis While the developments set out on the left are noteworthy, we cannot forget that
for the last ten years. When I sat back to reflect on what the results of the reinsurance industry need to be reflected on against what has
transpired over the course of 2021 for the South African non-life insurance and life
transpired in the reinsurance industry over the course of the
insurance industries.
2021 financial year, I thought this was a year that had seen more
change in the South African reinsurance world than most others – Coming off a 7% negative economic growth in 2020, the lowest economic growth in
largely due to the enactment of the Insurance Act in 2018: more than ten years, 2021 saw a respectable annual gross domestic product (GDP)
growth rate of 4.9%.2 According to Stats SA “Despite these positive figures, real
• African Reinsurance Corporation (South Africa) Limited (African Re) relicenced GDP has yet to recover to the level recorded in the second quarter of 2021, before
as a composite reinsurer; civil unrest and stricter lockdown restrictions shook the economy in the third quarter.
Real GDP continues to lag pre-pandemic levels too, with economic activity on par
• Hannover Reinsurance Africa Limited transferred its business operations to with the third quarter of 2017.”3 In addition, average consumer inflation for 2021
Hannover Life Reassurance Africa Limited, and Hannover Life Reassurance was 4.5%, higher than the averages recorded for 2020 (3.3%) and 2019 (4.1%). 4
Africa Limited was renamed to Hannover Re South Africa Limited (Hannover The unemployment rate rose to a record high of 35.3% in the last quarter of 2021.5
Re). Hannover Re now operates under a composite reinsurance licence; and These factors placed immense pressure on the disposable income of consumers
• SCOR SE (Incorporated in France) - Africa Branch (SCOR Africa Branch) and policyholders with cascading impacts on premium renewals, rate increases and
commenced business activities in South Africa following the sale of SCOR lapse rates.
Africa Limited to SCOR Africa Branch. SCOR Africa Branch operates as a branch
underwriting both life and non-life reinsurance risks. For the life insurance industry, the industry went from an overall loss of R5 billion
experienced in 2020 to a healthy profit of R17.1 billion in 2021. The non-life industry
managed to increase its profits from R5.5 billion experienced in 2020 to R12.1
In previous editions of this survey I noted that there was an expectation that the level
billion in 2021. It is clear from these results that the primary insurance industry was
of competition may increase due to foreign reinsurers being able to operate branches
sufficiently protected by the reinsurance industry through the robust reinsurance
under the new Insurance Act. The market saw no development for many years until
structures and arrangements in place, and that the reinsurance industry bore the brunt
2021 with SCOR Africa Branch. It would be interesting to see how this development
of a large extent of the loss events that occurred during 2021.
evolves over the next few years.
1
https://www.resbank.co.za/en/home/publications/publication-detail-pages/prudential-authority/pa-selected-
The latest insurance sector data published by the South African Reserve Bank south-african-insurance-sector-data/2021/Selected-South-African-Insurance-Sector-2021
indicates that there are eight professional reinsurers as at December 2021.1 In this 2
https://www.statssa.gov.za/?p=15214
year’s survey, we analyse the results of four registered reinsurers in the South African 3
https://www.statssa.gov.za/?p=15214
market, representing approximately 64% of the market. These results include three 4
https://www.statssa.gov.za/?p=15080
composite reinsurers, and one composite branch. 5
https://www.reuters.com/world/africa/south-africas-unemployment-rate-hits-new-record-high-q4-
2021-2022-03-29/
140 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

Financial indicators Reinsurers are of the view that to some extent a hardening of rates, particularly in
the non-life sector, is expected to be observed in the 2022 financial year in respect
For this year’s analysis, I conducted a series of interviews with various reinsurers to of traditional and attritional risk exposures, off the back of the KwaZulu-Natal floods
better understand their results and obtain their insights on what the future holds for and riots. However, this will need to be strongly supported by past loss experience
the South African reinsurance industry. without a blanket approach applied. For the life insurance industry, premium rate
increases are not as easily enforceable due to the longer-term view of the market
To many, 2020 was seen as the year of survival, with 2021 being the year of which is expected to remain largely stable over time.
recovery and growth. However, insurers and reinsurers alike were still grappling
with the impacts of the struggling economic environment, COVID-19, political unrest Investment income declined by 11%, a stark contrast to the growth of 12%
and natural catastrophes (albeit benign in 2021) – and this is clearly reflected in the experienced in 2020 and 23% in 2019. However, the decline in investment income
2021 results of the reinsurance industry. is directly correlated with the decrease in investment balances held by reinsurers
of 22%, primarily attributable to the political unrest and COVID-19 claim events, and
to a smaller extent natural catastrophe claims, which were in some cases settled
Growth out of investments.

Regrettably, a downward trend in gross written premium (GWP) was experienced for Illustrated below is the share of the reinsurance market by GWP based on the
the third year since 2019 with a growth rate of 1% experienced in 2021 (2020: 8%). reinsurers that participated in this survey, as reported in the audited financial
These results are unsurprisingly reflective of the continued repressed local and global statements of these reinsurers.
economic environment. Surprisingly though, these results are not reflective of the
Total GWP
growth in GWP experienced by life insurers of 9.7% and non-life insurers of 7%. In
the previous year, we had expected that due to the anticipated increased losses from African Reinsurance Corporation 9%
business interruption claims, uncertainties around the nature and frequency of natural (South Africa) Limited 9%

catastrophe events, business failures, loss of employment, death and increased health- 26%
Hannover Re South Africa Africa Limited*
related claims, the reinsurance market would see a hardening of rates, manifested 31%
through higher growth levels on GWP. This was not consistently evident in the results
59%
of the reinsurance industry and can be attributable to a few driving factors: Munich Reinsurance Company of Africa Limited
54%

6%
• increased competition in the market; SCOR SE (Incorporated in France) - Africa Branch** 6%

• the affordability of policyholders was highly constrained from the tough 0% 10% 20% 30% 40% 50% 60% 70%
economic environment; 2020 2021
• the market was of the view that it might have been premature to increase
* We have included the 2020 comparative results of both Hannover Reinsurance Africa Limited and Hannover Re
premium rates following the COVID-19 and political riot risk events; and South Africa Limited as the 2020 comparative results of Hannover Re South Africa Limited does not include the
results of Hannover Reinsurance Africa Limited. This comment applies to all graphs depicting an analysis by reinsurer.
• many reinsurers applied stricter underwriting and pricing principles while
also de-risking their portfolio of poor performing business. ** The 2021 amounts presented above represent the financial results of the branch (SCOR SE (Incorporated in France)
- Africa Branch), while the 2020 amounts presented reflect the results of the reinsurance company (SCOR Africa
Limited). This comment applies to all graphs depicting an analysis by reinsurer.
 The South African Insurance Industry Survey 2022 - proudly published for more than twenty years | 141

Munich Re and Hannover Re lead the reinsurance market with their combined Other key performance indicators based on the results of the five reinsurers
market share accounting for 85% (2020: 85%) measured by GWP volumes. participating in the 2021 KPMG survey are as follows:
Consistent with previous years, the market share distribution across reinsurers
continues to remain relatively consistent moving from 2020 and 2021, with only
Performance indicator 2021 2020
marginal movements noted across industry players.
Net commission to net earned premium 11% 10%
Looking at the split of GWP between the life and non-life industry, the comments Management and other expenses to net earned premium 14% 14%
noted above continue to hold true. We discuss the detailed movements per reinsurer Net policyholder benefits and entitlements to net earned premium 115% 77%
further on in our analysis.
Underwriting loss6 R3 782 million R50 million
Life GWP

The net commission to net earned premium ratio has remained stable for the industry
40%
Hannover Re South Africa Africa Limited* from 2020 to 2021, however some notable variances across individual insurers will be
39%
discussed further on in this article.
Munich Reinsurance Company 50%
of Africa Limited 52% The management and other expenses to net earned premium ratio has remained
stable, indicative of the active and controllable cost containment measures employed
SCOR SE (Incorporated in France) 10% by reinsurers, in the context of unavoidable claims costs exposures, as well as
- Africa Branch** 9%
the lower level of activity during the year as a large component of the workforce
continued to work from home.
0% 10% 20% 30% 40% 50% 60%

2020 2021 The impacts of COVID-19 were still being felt for large parts of 2021. For the life
insurance industry, increased mortality experience was still prevalent due to the
phased roll-out of vaccines that occurred in the second half of 2021, with vaccine
Non-life GWP
hesitancy also contributing to this experience. Most businesses were able to operate
African Reinsurance Corporation 13% as normal for the most part of the year resulting in a lower degree of business
(South Africa) Limited 14%
interruption claims for non-life insurers. In the context of the losses that (re)insurers
18% were exposed to in the past, despite the decline in business interruption claims, many
Hannover Re South Africa Africa Limited* 26% industry players either scaled back their exposure to or stopped writing business
interruption cover altogether. It is no surprise that the industry loss ratio deteriorated
Munich Reinsurance Company 65%
of Africa Limited 55% as a result of ongoing COVID-19 claims, the riots in KwaZulu-Natal in July 2021 and
various, albeit benign, natural catastrophe events.
SCOR SE (Incorporated in France) 4%
- Africa Branch** 5%

0% 10% 20% 30% 40% 50% 60% 70%

6
2020 2021 Net earned premium + reinsurance commission income – net claims incurred – acquisition costs –
management and other expenses
142 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

While Sasria SOC Limited (Sasria) was largely on risk for the losses emanating Breaking the results up further, while reinsurers writing life insurance risks were hit
from the July 2021 KwaZulu-Natal riots compared to the rest of the primary much harder than non-life insurance risks, it was a tough year all round for life and
non-life insurance industry, all South African reinsurers surveyed were exposed non-life risks alike.
to these losses.7 South Africa also experienced three natural catastrophe
events in 2021: Cyclone Eloise in January 2021 and floods and wildfires
Life loss ratio
in the Western Cape in April 20218, which were individually and in the
aggregate benign.
96%
Hannover Re South Africa Africa Limited* 158%
The graph included below illustrates the net loss ratio for each reinsurer which
Munich Reinsurance Company 83%
is a direct reflection of the performance of the life and non-life insurance of Africa Limited 138%
industries. Except for African Re that demonstrated an improved loss ratio,
SCOR SE (Incorporated in France) 72%
the rest of the reinsurers surveyed experienced a worsening of their - Africa Branch** 164%
loss ratios.
- 20% 40% 60% 80% 100% 120% 140% 160% 180%
Net loss ratio 2020 2021

African Reinsurance Corporation 62%

(South Africa) Limited 54%
Non-life loss ratio
81%
Hannover Re South Africa Africa Limited* 108%
African Reinsurance Corporation 62%
(South Africa) Limited 54%
Munich Reinsurance Company 78%
of Africa Limited 121%
62%
Hannover Re South Africa Africa Limited*
49%
SCOR SE (Incorporated in France) 60%
- Africa Branch** 138% Munich Reinsurance Company 64%
of Africa Limited 66%
- 20% 40% 60% 80% 100% 120% 140% 160%

SCOR SE (Incorporated in France) 42%

2020 2021 - Africa Branch** 15%

- 10% 20% 30% 40% 50% 60% 70%

2020 2021
7
https://www.sasria.co.za/wp-content/uploads/2022/06/Sasria-Integrated-Report-2021.pdf
8
https://aon.co.za/insights/aon-2021-weather-climate-and-catastrophe-insight-report/
 The South African Insurance Industry Survey 2022 - proudly published for more than twenty years | 143

Underwriting performance per reinsurer

180%

162%
160%

138% 140% 138%

140%

121%
120%
109% 108%
105%
100% 99%
100% 95%

81% 78%
80%

62% 60%
60% 54%

40%
31%
24% 25% 22% 20%
20% 19%
13%11% 13% 13% 15%
14% 11%
6% 8%
2%
0%

2021 2020 2021 2020 2021 2020 2021 2020

African Reinsurance Hannover Re South Africa Munich Reinsurance SCOR SE (Incorporated in
Corporation (South Africa) Africa Limited* Company of Africa Limited France) - Africa Branch**
Limited

Loss ratio Underwriting loss/Combined ratio Net commission ratio Expense ratio

All reinsurers experienced a net underwriting loss for 2021 which deteriorated from In the previous year we reported a reduction in African Re’s GWP and net earned
2020 to 2021. Included below is our analysis where we dive deeper into the results premium of 18% and 20% respectively. During 2021 GWP growth remained flat with a
of each reinsurer. slight reduction in net earned premium of 1%, a vast improvement compared to the result
of 2020. This is attributable to the impact of the final stages of the implementation of the
African Re reinsurer’s turnaround strategy which it embarked on in 2018 that aimed to de-risk and
enforce better underwriting discipline in the quality of risks undertaken.
Historically registered as a non-life reinsurer, African Re underwent a relicencing
process as part of their implementation of the Insurance Act and is now Although African Re was significantly exposed to losses from Sasria, the strategic
registered as a composite reinsurer. This enables it to write both non-life and restructuring of its retrocession programme coupled with the effects of the
life reinsurance business, however no life reinsurance business was written turnaround strategy resulted in an overall improvement in the net loss ratio from
during 2021. The results presented for 2021 therefore only relate to African 62% in 2020 to 54% in 2021. As a result, African Re’s investment and cash
Re’s non-life reinsurance business. and cash equivalent balances remained stable with a return on investments of
5% (2020: 4%) experienced for the year.
144 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

The increase in the combined ratio needs to be further dissected to understand its GWP and net earned premium improved significantly from 2020 with an increase
movement. While claims (and loss ratios) and management and other expenses in GWP experienced of 23% in 2021 (2020: decrease of 3%) and an increase in
have reduced over 2021, the largest contributor to the increase in the combined net earned premium experienced of 5% (2020: decrease of 13%). The increase is
ratio is the increase in the net commission ratio from 14% in 2020 to 31% in 2021. largely attributable to growth in the non-life business; however, a portion of this
This can be attributed to the increased extent of solvency relief contracts offered increase is related to portfolio transfer transactions that occurred in 2021 as a result
to cedants which attracted higher profit commission payments on profitable of the transfer of the non-life operations to Hannover Re. The mix of life and non-life
business, also as a result of the reinsurer’s turnaround strategy. business has remained largely stable with the non-life business contributing 53%
(2020: 46%) and life contributing 47% (2020: 54%) to overall GWP.
While a net underwriting loss of R51 million was experienced (2020:
R1.2 million underwriting profit), this was the lowest experienced loss across Unfortunately, the growth in GWP and net earned premium did not translate into an
all reinsurers surveyed. improved loss ratio for 2021, which saw a 27% deterioration in the ratio from 81%
experienced in 2020 to 108% experienced in 2021. Had it not been for the increase
in GWP and net earned premium, the loss ratio experience would have been far
worse, highlighting the significant extent of losses that the reinsurer was exposed
“The economy is in dire straits; we have witnessed monumental economic
to during the year. Losses are weighted more towards the life insurance business at
losses which the insurance industry has stood up to and demonstrated
a 79% (2020: 66%) contribution with the non-life business contributing 21% (2020:
their capacity and resilience. We encourage the wider economy to embrace
34%) to overall net claims incurred. The worsening of the loss ratio over the year is
the contribution of the insurance industry for the benefit of policyholders
mainly attributable to the life business as a result of worsening mortality and disability
and the economy as a whole.”
experience due to COVID-19. The non-life business provided some relief due to an
- Ibrahim Ibisomi (Management Consultant) and Sudadi Senganda improvement in the loss ratio from 2020. Although Hannover Re was also significantly
(General Manager: Finance and Administration) from African Re, exposed to losses from Sasria due to the KwaZulu-Natal riots, its net exposure was
reflecting on the results of the 2021 financial year. limited due to the relief provided by its retrocession agreement.

The impact of the results set out on the previous page culminates in an increase
in underwriting loss from R30.6 million in 2020 to R1 019 million in 2021.
Hannover Re

On 1 January 2021 the business operations of Hannover Reinsurance Africa Limited Munich Re
was transferred to Hannover Life Reassurance Africa Limited. Hannover Life
Reassurance Africa Limited was renamed to Hannover Re South Africa Limited and The non-life book of business contributed 64% (2020: 71%) to total GWP with the
operates under one composite reinsurance licence. For ease of comparability, we remaining 36% (2020: 29%) attributable to the life book of business. GWP from the
have included the 2020 comparative results of both Hannover Reinsurance Africa life business increased by 15% while GWP from the non-life business decreased
Limited and Hannover Re South Africa Limited (previously Hannover Life Reassurance by 18%. Due to the higher weighting of the non-life GWP to the total book of
Africa Limited) as the 2020 comparative results of Hannover Re South Africa Limited business, overall GWP decreased by 8% (2020: increase of 20%). Interestingly,
(previously Hannover Life Reassurance Africa Limited) does not include the results of while a decrease in overall GWP was experienced in 2021, overall net earned
Hannover Reinsurance Africa Limited. premium increased by 9% (2020: 3%).
 The South African Insurance Industry Survey 2022 - proudly published for more than twenty years | 145

As it relates to net claims incurred, the mix of life and non-life business is inverted In terms of GWP, the mix of life and non-life business is largely consistent with 2020
compared to GWP in that 87% (2020: 80%) of net claims incurred relates to the life with the life business contributing 53% (2020: 53%) to GWP and the non-life business
book of business with the remaining 13% (2020: 20%) relating to the non-life book. contributing 47% (2020: 47%) to overall GWP. Similarly, the increase in GWP of
Similar to Hannover Re, a deterioration in the overall loss ratio was experienced from 8% (2020: 16%) is consistent across both the life and non-life books. As with many
78% in 2020 to 121% in 2021. The increase in loss ratio emanates substantially from reinsurers, SCOR Africa Branch also embarked on an initiative to de-risk its portfolio,
the life book at a loss ratio of 138% (2020: 83%), with the non-life book loss ratio particularly its non-life portfolio due to the extent of exposure to catastrophe
coming in at 66% (2020: 64%). risks underwritten.

Consequently, the primary contributor to the increase in combined ratio from 99% As with Hannover Re and Munich Re, the net loss ratio for SCOR Africa Branch
in 2020 to 140% in 2021 is due to increased claims experience. While acquisition for 2021 worsened from 60% in 2020 to 138% in 2021, the highest loss ratio
expenses decreased and management expenses increased, the ratio to earned experienced across all reinsurers surveyed. The mix of net claims incurred changed
premium has remained largely consistent from 2020 to 2021 with a net commission materially from 2020 in that the life business contributed 98% (2020: 72%) to net
to earned ratio of 6% (2020: 8%) and management expense to earned ratio of 13% claims incurred while the non-life business contributed 2% (2020: 28%). The increase
(2020: 13%). in claims from the life book is the primary driver to the increase in loss ratio, with
the loss ratio for the life book coming in at 164% (2020: 72%) for 2021 and 15%
Looking at the underwriting result, Munich Re experienced the largest underwriting (2020: 42%) for the non-life book.
loss for the year, compared to the rest of the reinsurers surveyed, with a loss of
R2 259 million in 2021 from an underwriting profit of R42 million in 2020. Management have noted that the worsening claims experience is as a result of
increased mortality and losses due to COVID-19 as well as exposure to losses from
the KwaZulu-Natal July 2021 riots. It is important to highlight that a large portion of
SCOR Africa branch the non-life book is retroceded resulting in a favourable loss ratio, even though the
gross claims exposure was significant. In addition, the de-risking exercise performed
On 1 January 2021 SCOR SE (Incorporated in France) - Africa Branch commenced by management contributed to the favourable net loss ratio. For the life business,
business activities in South Africa. This follows the sale of SCOR Africa Limited to the extent of retrocession was not as high as for the non-life business and as a result,
SCOR Africa Branch at that date. For comparability, we have included the 2021 result the losses on a net claims incurred basis were more pronounced.
of the branch (SCOR SE (Incorporated in France) - Africa Branch) as well as the 2020
result of the insurance company (SCOR Africa Limited). The combined ratio increased from 95% in 2020 to 162% in 2021 directly as a result
of the claims experience. Decreases in acquisition costs were offset by increases in
The significant benefit of this structure to SCOR Africa Branch is being able to management and other expenses as can be seen by the relatively stable management
leverage off the AA- global credit rating of SCOR SE, without having its credit rating expense to earned premium ratio of 22% (2020: 20%).
limited to the South African sovereign cap. Other than not being required to establish
governance committees such as a board and audit and risk committee, no material These results culminated in an underwriting loss of R452 million, from an underwriting
changes have occurred in the operations of the branch. profit of R26 million experienced in 2020.
146 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

Investment performance – For the reinsurers writing life insurance risk, no immediate changes are being
considered to long-term assumptions related to COVID-19, however this an area they
Reinsurers achieved an average return on investments (including cash and cash continue to monitor due to the uncertainty of the possibility of future pandemics.
equivalents) of 6.5% (2020: 6.0%) compared to an average prime rate of 7.25%9 (2020:
– There is concern by reinsurers around the severity and frequency of natural
7.9%) and the average 10-year government bond yield of 9.098%10 (2020: 9.4%).
catastrophe events, with many parent retrocessionaires placing higher focus on
South Africa following the KwaZulu-Natal floods that occurred earlier this year.
Munich Re was the top performer in terms of investment returns in 2021 with
It will be interesting to see how reinsurers balance the protection enjoyed by
8.3% (2020: 7.1%). Hannover Re followed closely with 6.9% (2020: 6.8%), and
retrocessionaires in the past and how this will be renewed going forward, with the
African Re achieving a return of 5.0% (2020: 3.8%). SCOR Africa Branch is the
extent of cover it will provide to cedants who are equally exposed.
only anomaly with negative investment return of 1.7% (2020: positive 4%).
This is primarily due to interest expense recognised on funds withheld in excess of – Digitisation is high on the agenda as it relates to optimising client interface
investment income earned. Removing the impact of interest expense, SCOR Africa platforms and automation of underwriting and claims processes. A number of
Branch’s investment return is within a similar range as the rest of the reinsurers reinsurers are considering partnering with insurtechs, this is still in early stages of
surveyed at 4.7% for 2021. consideration with the lead being taken from global parent companies.

What the future holds for reinsurance operations

Quintin Landman, Financial Director of Hannover Re, noted that:
Reinsurers have a tough road ahead, having to navigate a barrage of uncertainty
related to investment markets, mortality losses from COVID-19, the risk of another “For life insurance, the effects of long-COVID is an area that
pandemic or additional COVID-19 waves and more frequent and severe natural will need to be monitored over time, we can also expect to see
catastrophes. According to S&P Global, “while reinsurers are price-takers in this an increase in dread disease risks from delayed screening due
insurance cycle, the winners will be those that combine underwriting discipline with to COVID-19. In respect of non-life insurance, ESG considerations
innovative risk solutions while enhancing their value proposition to cedents and from an underwriting and investment point of view, effects from
insureds. Our negative outlook could improve if we come to believe the sector may global warming, and the increase in catastrophe events will
earn its COC, but we don't expect this will happen before 2022, at the earliest.”11 be high on the agenda. The consequences of unemployment,
social conditions and inflation on repair/replacement costs
When asked about what future trends and developments we can expect to see in the is another area to watch closely as this may impact the
reinsurance market in the future, a few common themes mentioned by reinsurers affordability of policyholders.”
included the conversion to a branch structure, rate increases, ESG, natural catastrophe
events, continued COVID-19 uncertainty and digitisation:

– Many reinsurers are in the infancy stages of considering converting to a branch

structure, a structure that is favoured by many international retrocessionaire
parents. For others, this is not an option at all.
9
https://www.absa.co.za/indices/prime-rate/
– Reinsurers have started to actively consider the impact of ESG on financial 10
https://za.investing.com/rates-bonds/south-africa-10-year-bond-yield-historical-data
reporting, as well as on their underwriting and investment strategies. This is 11
https://www.spglobal.com/ratings/en/research/articles/211028-the-global-reinsurance-sector-outlook-remains-
largely being guided by their international parents. negative-as-returns-fall-short-12162847
In addition, while the buzzwords of the moment are
crytopassets, cryptocurrency, non-fungible tokens
and the like, none of the reinsurers surveyed were
considering providing reinsurance cover for these
associated risks in the near future. Again, this is being
guided by their international parents but discussions
around this are still in their infancy.

It is interesting to note that, with the exception of

Munich Re, no other reinsurer declared dividends during
the year, consistent with the financial results of 2020.
It is likely that many reinsurers are taking a conservative
approach, in the context of the strength of their balance
sheets, while the lingering effects of the COVID-19
pandemic runs its course.

Reinsurers have continued to demonstrate their

significance to the South African economy through the
support they provided to primary insurers in times of
extreme uncertainty and volatility. It appears that every
year seems to bring with it a new set of challenges
– however, the ability of the reinsurance industry to
provide unwavering support when it matters most is
commendable, ensuring a better outcome for the
greater good.
148 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

REINSURERS | Statement of Financial Position | R’000

Accounting year end Dec-21 Dec-20 Dec-21 Dec-20 Dec-20
Group/Company African Reinsurance Corporation Hannover Re South Hannover Life Hannover
(South Africa) Limited Africa Limited* Reassurance Africa Reinsurance Africa
Limited* Limited*
Share capital and share premium 80 300 80 300 1 177 292 162 500 72 778
Retained earnings/(deficit) 850 630 768 994 469 298 843 220 630 332
Other reserves 51 702 51 702 14 340 21 567 434 375
Total shareholders' funds 982 632 900 996 1 660 930 1 027 287 1 137 485

Gross outstanding claims provision 1 380 067 1 401 559 6 394 379 2 207 358 2 559 184
Gross unearned premium provision 169 775 146 860 488 742 14 780 469 028
Provision for profit commission - - 428 976 129 918 359 716
Policy holder liabilities under insurance contracts - - 3 210 590 2 804 699 -
Liabilities in respect of investment contracts - - - - -
Deferred reinsurance commission revenue 36 940 35 055 125 355 20 873 122 266
Deferred tax liabilities/(assets) 11 050 1 802 (356 284) 5 416 (10 748)
Funds withheld 1 865 551 1 728 495 320 230 3 874 339 257
Other liabilities 229 791 179 030 2 092 660 589 487 547 557
Total liabilities 3 693 174 3 492 801 12 704 648 5 776 405 4 386 260

Total investments 3 084 056 3 036 077 3 877 942 2 495 728 1 686 381

Funds withheld 63 254 28 668 516 643 110 490 411 182
PPE, intangible assets and ROU assets 769 943 47 475 2 589 15 847
Retrocessionaires' share of outstanding claims provision 1 087 150 1 080 200 4 590 328 1 257 449 1 772 115
Retrocessionaires' share of unearned premium provision 123 127 100 642 383 083 - 400 332
Retrocessionaires' share of profit commission - - 259 999 485 349 825
Retrocessionaires' share of liabilities under life insurance contracts - - 1 858 754 1 785 030 -
Deferred aquisition cost 44 499 39 423 337 644 179 660 144 305
Cash and cash equivalents 47 640 9 269 306 961 204 885 150 962
Other assets 225 311 98 575 2 186 749 767 376 592 795
Total assets 4 675 806 4 393 797 14 365 578 6 803 692 5 523 744

Return on equity 8% 9% (23%) 13% 3%

Total assets / Total liabilities 127% 126% 113% 118% 126%
Change in shareholders' funds 9% 62%

* On 1 January 2021 the business operations of Hannover Reinsurance Africa Limited was transferred to Hannover Life Reassurance Africa Limited. Hannover Life Reassurance Africa Limited was renamed to Hannover Re South Africa Limited
and operates under one composite reinsurance licence. For ease of comparability, we have included the 2020 comparative results of both Hannover Reinsurance Africa Limited and Hannover Re South Africa Limited (previously Hannover Life
Reassurance Africa Limited) as the 2020 comparative results of Hannover Re South Africa Limited (previously Hannover Life Reassurance Africa Limited) does not include the results of Hannover Reinsurance Africa Limited.
REINSURERS | Statement of Financial Position | R’000
Accounting year end Dec-21 Dec-20 Dec-21 Dec-20
Group/Company Munich Reinsurance SCOR SE (Incorporated in
Company of Africa Limited France) - Africa Branch**
Share capital and share premium 544 915 544 915 - 344 700
Retained earnings/(deficit) 1 132 890 2 951 956 (463 440) 138 313
Other reserves (26 782) (60 190) 1 673 23 889
Total shareholders' funds 1 651 023 3 436 681 (461 767) 506 902

Gross outstanding claims provision 9 141 615 8 054 490 2 663 259 1 722 805
Gross unearned premium provision 3 001 803 2 444 843 256 879 231 059
Provision for profit commission (100 450) 74 509 - -
Policy holder liabilities under insurance contracts 3 556 878 3 400 090 745 520 583 740
Liabilities in respect of investment contracts - - - -
Deferred reinsurance commission revenue 1 294 808 819 103 88 114 70 651
Deferred tax liabilities/(assets) (257 031) 251 191 (559) (18 898)
Funds withheld 5 959 25 924 1 686 081 902 372
Other liabilities 2 973 924 2 629 681 1 708 171 950 452
Total liabilities 19 617 506 17 699 831 7 147 465 4 442 181

Total investments 3 837 447 5 874 700 133 201 998 928

Funds withheld 600 228 205 872 - -

PPE, intangible assets and ROU assets 42 592 45 768 380 875 8 544
Retrocessionaires' share of outstanding claims provision 6 203 029 5 231 204 1 955 687 1 734 911
Retrocessionaires' share of unearned premium provision 2 756 025 2 200 757 185 304 163 829
Retrocessionaires' share of profit commission (79 498) 68 260 - -
Retrocessionaires' share of liabilities under life insurance contracts 6 236 473 481 285 483 434 973
Deferred aquisition cost 3 637 578 3 221 254 190 791 166 412
Cash and cash equivalents 1 106 693 595 751 545 742 730 410
Other assets 3 158 199 3 219 465 3 008 615 711 076
Total assets 21 268 529 21 136 512 6 685 698 4 949 083

Return on equity (85%) 11% 100% 13%

Total assets / Total liabilities 108% 119% 94% 111%
Change in shareholders' funds (52%) (191%)

** On 1 January 2021 SCOR SE (Incorporated in France) - Africa Branch commenced business activities in South Africa. This follows the sale of SCOR Africa Limited
to SCOR SE at that date. The 2021 amounts presented above represent the financial results of the branch (SCOR SE (Incorporated in France) - Africa Branch),
while the 2020 amounts presented reflect the results of the reinsurance company (SCOR Africa Limited).
150 | The South African Insurance Industry Survey 2022 - proudly published for more than twenty years

REINSURERS | Statement of Comprehensive Income| R’000

Accounting year end Dec-21 Dec-20 Dec-20 Dec-20 Dec-20

Group/Company African Reinsurance Corporation Hannover Re South Hannover Life Hannover
(South Africa) Limited Africa Limited* Reassurance Africa Reinsurance Africa
Limited* Limited*
Gross premiums written 2 119 057 2 120 721 7 579 185 3 329 334 2 855 940
Net premiums written 584 652 586 541 2 776 152 1 420 817 1 104 395
Earned premiums 584 222 589 334 2 688 254 1 418 288 1 143 870

Total net investment income 157 675 114 618 287 381 183 768 123 823
Reinsurance commission revenue 600 671 555 246 815 049 120 890 498 833
Other income 55 - - 36 198 11 734
Total income 1 342 623 1 259 198 3 790 684 1 759 144 1 778 260

Policyholder benefits and entitlements 316 937 362 447 2 903 595 1 362 815 706 334
Acquisition expense 779 053 635 317 1 323 841 13 519 930 755
Management and other expenses 139 935 145 558 295 313 193 533 95 150
Total expenses 1 235 925 1 143 322 4 522 749 1 569 867 1 732 239
Net profit/(loss) before tax 106 698 115 876 (732 065) 189 277 46 022
Tax (25 062) (31 192) 358 143 (53 712) (6 982)
Net profit/(loss) after tax 81 636 84 684 (373 922) 135 565 39 039
Other comprehensive income - - (9 476) 27 318 67 541
Total comprehensive income for the year 81 636 84 684 (383 398) 162 883 106 580
Minority shareholders' interest - - - - -
Transfer to/(from) retained earnings - - 9 476 (27 318) (67 541)
Dividends - - - - -
Change in retained earnings 81 636 84 684 (373 922) 135 565 39 039
Net premium to gross premium 28% 28% 37% 43% 39%
Policyholder benefits and entitlements to earned premium 54% 62% 108% 96% 62%
Management and other expenses to earned premium 24% 25% 11% 14% 8%
Comments Composite company Composite company Company Company

* On 1 January 2021 the business operations of Hannover Reinsurance Africa Limited was transferred to Hannover Life Reassurance Africa Limited. Hannover Life Reassurance Africa Limited was renamed to Hannover Re South Africa Limited
and operates under one composite reinsurance licence. For ease of comparability, we have included the 2020 comparative results of both Hannover Reinsurance Africa Limited and Hannover Re South Africa Limited (previously Hannover Life
Reassurance Africa Limited) as the 2020 comparative results of Hannover Re South Africa Limited (previously Hannover Life Reassurance Africa Limited) does not include the results of Hannover Reinsurance Africa Limited.
REINSURERS | Statement of Comprehensive Income | R’000

Accounting year end Dec-21 Dec-20 Dec-21 Dec-20

Group/Company Munich Reinsurance SCOR SE (Incorporated in
Company of Africa Limited France) - Africa Branch**
Gross premiums written 13 173 780 14 364 946 1 597 902 1 485 419
Net premiums written 5 607 535 5 119 954 806 135 479 524
Earned premiums 5 612 596 5 141 185 733 607 514 853

Total net investment income 408 287 458 739 (11 204) 69 224
Reinsurance commission revenue 2 539 605 3 017 544 96 419 167 357
Other income 17 667 12 845 - -
Total income 8 578 155 8 630 313 818 822 751 434

Policyholder benefits and entitlements 6 782 415 4 015 827 1 015 865 308 403
Acquisition expense 2 886 954 3 427 058 107 634 243 631
Management and other expenses 741 625 673 478 158 763 103 561
Total expenses 10 410 994 8 116 363 1 282 262 655 595
Net profit/(loss) before tax (1 832 839) 513 950 (463 440) 95 839
Tax 421 773 (128 061) - (27 649)
Net profit/(loss) after tax (1 411 066) 385 889 (463 440) 68 190
Other comprehensive income 33 408 (91 906) (1 937) 17 248
Total comprehensive income for the year (1 377 658) 293 983 (465 377) 85 438
Minority shareholders' interest - - - -
Transfer to/(from) retained earnings (33 408) 91 906 1 937 (17 248)
Dividends 408 000 350 000 - -
Change in retained earnings (1 819 066) 35 889 (463 440) 68 190
Net premium to gross premium 43% 36% 50% 32%
Policyholder benefits and entitlements to earned premium 121% 78% 138% 60%
Management and other expenses to earned premium 13% 13% 22% 20%
Comments Composite company Composite branch

** On 1 January 2021 SCOR SE (Incorporated in France) - Africa Branch commenced business activities in South Africa. This follows the sale of SCOR Africa Limited
to SCOR SE at that date. The 2021 amounts presented above represent the financial results of the branch (SCOR SE (Incorporated in France) - Africa Branch),
while the 2020 amounts presented reflect the results of the reinsurance company (SCOR Africa Limited).