April 17 - The single biggest sector in the South African market, the
financial services industry may be heading for hard times if we take into
account the latest findings in an Ernst and Young report.
The survey found that insurance investment income earnings turned
negative in the first three months of 2008, showing a decline in economic
fundamentals and perhaps tolling the bell for tougher times ahead.
"The last few years have been good for the life insurance market largely
through rising equity markets, which have resulted in strong and growing levels
of investment income," said Tim Rutherford, speaking for Ernst and Young. "But
global market turmoil, coupled with our own less favorable economic prospects
locally, has brought an end to boom investment income earnings. In fact,
investment income earnings turned negative in the quarter, implying contracting
investment income earnings."
"We notice the first quarter of 2008 also saw a strong slump in profits
growth," he continued, "but unlike the first quarter of 2007, there is a
considerable fall-off in investment income growth, which looks likely to hold
into the next few quarters, and thereby squeeze profit growths."
Despite these statistics in the field of insurance investment income, life
insurance confidence remained strong in the first quarter, according to the
report. Confidence in life insurance is now the strongest of all financial
services sectors, ahead of investment management confidence at 77 index points
and the banking industry with 78 index points. "The other sectors of the
financial services industry are reporting significantly weaker confidence on the
back of declining economic fundamentals," said Rutherford.
Related Insurance Articles: * Glenrand Improves its BEE Rating * Mutual and Federal Launches New Product * Decrease in Number of Long Term Insurance Complaints * Woolworths Sells Financial Services Sector to Absa * Long Term Insurance Passes R1 Billion Milestone * Deutsche Bank Insurance Analyst Quits * Old Mutual Insurance Opens Corporate Creche * SAIA to Help Fight Crime
|