South African Insurance Sector "SA Retail life industry - Running to stand ..."

Research evidence excerpt

South African Insurance Sector "SA Retail life industry - Running to stand ..."

Global Research

14 May 2026ab

South African Insurance Sector Equities

South AfricaSA Retail life industry - Running to stand still

Insurance

Michael Christelis, FIA CFA

A bleak long-term story of margin erosion Analyst

System new business value has repeatedly disappointed (EV new business/margins or, michael.christelis@ubs.com

IFRS 17 CSM and RA new business). In contrast, Sanlam's SA performance has been +27-11-322 7320

impressive. We analyse long-term data to assess the drivers of this weakness

between: 1) volumes; 2) competition-driven; 3) demographic impacts; and 4) product

mix, and assess the insurers' strategic responses. Addressing costs is the key action to

improve both earnings (onerous losses) and VNB margin, in our view, which aligns with

Old Mutual's material cost reduction strategy.

Why does it matter? It's as obvious as it sounds, more visible under IFRS 17

Post '23, IFRS 17 reporting allows a direct lens to new business impacts on both earnings

(onerous contracts) and future growth (CSM/RA). We estimate system CSM growth of

just 3% for FY25 led by CPI (c23% y/y) despite adding 9% in new business (CPI adding

c50%). Other bank models show surprisingly low growth y/y (high run-off profiles).

Traditional insurers spent cR22bn on new business costs (FY25) and generated cR15bn

in value (c70% conversion). Bank models generated >500% of spend (limited

acquisition cost) which is likely driving insurers' strategic focus into banking, in our view.

Mass market suffering "The Capitec Effect"

Volumes here are robust with long-term real growth of c3%p.a. (c1.4% excl Capitec).

However, margins (SLM, OMU, MTM) are on average c40% lower post Capitec's funeral