Floods Affect South African Insurance Profits

Insurance profits is being affected by recent floods Profits earned by reinsurers in 2010 could be swallowed.

Reinsurance groups in South Africa will see significant portions of their profits earned in 2010 swallowed up by payments that need to be made out to cover the recent floods.

Analysts believe that the floods will leave reinsurance groups counting their losses at the end of this financial year.

Zurich Insurance Group was the first company to release its latest financial results on Saturday.

The group showed net income of R144.4 million, in comparison with a R184.6 million loss in 2009.

However, as noted, the impressive 2010 financial results will be overshadowed by the expected payouts to cover the recent floods.

The portfolio manager at Metropolitan Assert Management, Chris Naidoo, said that floods are expected to continue until April, meaning that an exceptionally high volume of claims will be felt in the first half of the year.

As such, said Naidoo, South African reinsurers would need to brace for huge losses this year.

In addition, consumers would need to expect higher premiums as a result.

"Last year was good, in fact it was an exceptional year," said Naidoo, "so if some companies already incurred a high loss or had a low underwriting margin, this year is going to be hell."

Zurich Insurance's results also reflected a reduction in claims - 30% - which dropped from R3.7 billion in 2009 to R2.6 billion in 2010.