The insurance market in the Maghreb (Part 2)

Having dedicated the first part of the special Maghreb coverage on the general context of insurance and on the background of the Algerian, Moroccan and Tunisian markets, Atlas Magazine presents in this second and final part the market’s current structure and operational performance achieved.

The structure of the insurance markets in the Maghreb

Algeria

Algiers' coastline © Damien Boilley [4], CC BY 2.0 [5]

With 1.148 billion USD in turnover in 2011, Algeria is holding the 64th ranking in terms of written premiums, underwriting 7.6% of the overall contributions of the African continent (excluding South Africa).

The 0.7% insurance penetration rate is low compared to that of industrialized countries (9%) and to the average rate of emerging countries (3%). With one agency or insurance office for 28 000 inhabitants (versus 1 for 5000 worldwide) expenditure incurred for coverage purchase remains poor. In 2011, insurance density was only 34 USD per capita, far beyond the world average of 620 USD.

Despite the end of state monopoly on insurance operations, public actors largely dominate the market where they control nearly 75% of the turnover.

In 2011, 19 insurers were sharing the market. Foreign companies show a growing interest in Algeria. Axa, the Macif and BNP Paribas have benefited from recent participations in local companies.

Market turnover: 2008-2011 (excluding CCR)

in thousands USD

	2008	2009	2010	2011	Shares 2011
SAA	241 854	265 027	275 187	280 198	24.40%
CAAT	187 021	189 366	193 078	193 940	16.89%
CAAR	163 142	188 159	175 515	182 055	15.85%
CASH	149 935	126 263	102 564	104 675	9.12%
CNMA	58 356	70 595	92 515	89 199	7.77%
CIAR	68 217	86 204	81 986	80 997	7.05%
Alliance Assurances	31 264	40 470	46 929	51 715	4.50%
2A	28 242	37 206	41 665	42 440	3.70%
Salama Assurances	24 704	35 333	34 823	37 060	3.23%
GAM	24 247	29 913	39 910	37 749	3.27%
TRUST	19 752	20 732	25 487	24 751	2.15%
CARDIF*	3 346	7 606	9 803	11 938	1.04%
TALA*	-	-	-	7 433	0.65%
SAPS*	-	-	-	3 193	0.28%
MAATEC	531	568	823	1 073	0.09%
AXA Dommages	-	-	-	27	0.01%
MACIR Vie*	-	-	-	-	-
CAARAMA*	-	-	-	-	-
AXA Vie*	-	-	-	-	-
Total	1 000 611	1 097 440	1 120 285	1 148 444	100%

* Life companies Sources: Annual reports, General management of the treasury, Insurance department, Ministry of Finance, Algeria

Turnover’s evolution per class of business: 2008-2011

Motor insurance accounts for nearly 51% of total market premiums. It represents 60% of the portfolio of private companies. Life insurance does not exceed 8% of the overall written premiums.

in thousands USD

	2008	2009	2010	2011	Shares 2011
Non life
Motor	435 272	502 794	552 911	582 444	50.72%
Property damage	382 444	409 637	366 167	387 099	33.70%
Marine	84 784	86 687	82 877	75 247	6.55%
Credit	8 048	5 364	644	186	0.01%
Agricultural risks	10 554	10 813	14 409	13 886	1.21%
Total non life	921 103	1 015 295	1 017 008	1 058 861	92.19%
Life
Total life	79 508	82 145	103 277	89 583	7.81%
Grand total	1 000 611	1 097 440	1 120 285	1 148 444	100%

in thousands USD Sources: Annual reports, General management of the treasury, Insurance department, Ministry of Finance, Algeria

Morocco

Business Center, Rabat, Morocco © Davide Cesare Veniani [6], CC BY-SA 3.0 [7]

With a turnover of 2.788 billion USD in 2011, Morocco holds the 53rd position in the world ranking designed by Sigma magazine. First Maghreb country and second African country, Morocco accounts for 18.2% of the continent’s total revenues, excluding South Africa.

The 2% penetration rate is higher than that Tunisia and Algeria, but still down compared to the rate posted by some African countries like South Africa (15.9%), Namibia (8%), and Kenya (3.2%). Insurance density is only 89 USD per capita.

In 2011, 17 insurers including three mutuals shared the market. The state is now present in direct insurance through the national reinsurer SCR which has a 40% stake in the group Atlanta Sanad and also a participation in the credit insurer Smaex.

Turnover’s evolution per company*: 2008-2011

in thousands USD

	2008	2009	2010	2011	Shares 2011
Wafa Assurance	522 228	548 833	539 056	616 287	22.10%
RMA Watanya	503 118	537 124	533 063	511 067	18.32%
Axa Assurance Maroc	360 359	390 912	357 635	382 133	13.70%
CNIA Essaada Assurance	341 380	361 397	356 342	354 597	12.72%
Sanad	141 672	152 414	145 942	150 979	5.42%
Atlanta	131 830	144 523	142 501	141 350	5.07%
MCMA	75 910	96 192	89 592	136 078	4.88%
Zurich	93 114	104 810	109 450	122 568	4.40%
Marocaine Vie	98 477	108 936	110 112	117 959	4.23%
CAT	78 996	80 200	79 368	77 291	2.77%
MAMDA	39 241	42 007	48 625	64 773	2.32%
Maroc Assistance	29 658	35 173	37 595	38 054	1.36%
Isaaf Mondiale Assistance	29 727	36 198	35 652	36 036	1.29%
MATU	28 474	26 021	25 865	25 115	0.90%
Euler Hermes ACMAR	5 914	6 198	6 637	9 603	0.34%
Axa Assistance Maroc	2 359	3 054	3 582	4 236	0.15%
Wafa IMA Assistance	-	-	-	766	0.03%
Total	2 482 459	2 673 991	2 621 018	2 788 893	100%

* Including acceptances Source: Moroccan federation of insurance and reinsurance companies (FMSAR)

Turnover’s evolution per class of business (excluding SCR): 2008-2011

Unlike the other Maghreb countries, life and capitalization insurance constitutes the most important class of business with 32% of market shares in 2011, compared to 31.5% for motor.

in thousands USD

	2008	2009	2010	2011	Shares 2011
Non life
Motor	753 234	841 246	847 896	879 049	31.52%
Health	309 495	335 042	326 748	326 767	11.72%
Workmen’s compensation	208 451	233 819	226 998	228 458	8.19%
Fire	109 146	120 275	123 740	124 036	4.45%
Marine	99 006	88 325	84 632	85 210	3.06%
Credit	67 657	81 205	83 799	89 134	3.20%
Third party liability	48 586	54 182	54 908	57 249	2.05%
Engineering	36 777	33 784	36 480	39 621	1.42%
Others	17 074	20 969	22 743	47 341	1.70%
Total non life	1 649 425	1 808 847	1 807 944	1 876 864	67.30%
Life
Total life	824 451	848 351	789 786	892 980	32.02%
Total life and non life	2 473 877	2 657 198	2 597 730	2 769 845	99.32%
Acceptances
Total acceptances	8 583	16 793	23 288	19 048	0.68%
Grand total	2 482 459	2 673 991	2 621 018	2 788 893	100%

in thousands USD *Including credit, third party liability, engineering and acceptances Source: Moroccan federation of insurance and reinsurance companies (FMSAR)

Tunisia

With 788 million USD of premium income, Tunisia ranks 77th worldwide according to Sigma. It accounts for 5.2% of the overall premiums written in Africa (excluding South Africa).

The 1.8% penetration rate is more than 2.5 times as high as that of Algeria. Insurance density, 77 USD per capita, has steadily increased in recent years but is still lagging behind international standards.

The market includes 19 direct insurance companies 15 of which are non-life and 4 life companies.

Turnover’s evolution per company (excluding Tunis Re): 2008-2011

in thousands USD

	2008	2009	2010	2011	Shares 2011
Star	157 746	159 954	149 130	137 628	17.45%
Comar	90 404	91 294	90 868	92 623	11.75%
GAT	55 695	59 576	66 834	71 577	9.08%
Astree	61 630	63 881	63 645	67 716	8.59%
Maghrebia	74 071	61 365	60 357	63 122	8.00%
AMI	64 599	70 029	64 896	61 720	7.83%
Carte	61 242	59 987	62 338	50 062	6.35%
MAE	42 813	45 815	47 152	46 167	5.85%
Assurances Biat	38 480	38 644	42 223	42 475	5.38%
Lloyd	31 952	32 525	34 160	35 056	4.44%
Salim	21 623	25 350	25 775	27 115	3.44%
MGA	14 199	18 434	21 022	20 316	2.58%
Maghrebia vie	-	16 627	18 685	19 859	2.52%
Hayett	10 823	12 974	14 452	15 553	1.97%
Carte Vie	-	-	-	15 450	1.96%
Ctama	18 690	18 310	15 592	14 559	1.85%
Cotunace	4 975	4 713	4 461	3 647	0.46%
Amina	4 019	2 101	1 955	2 155	0.27%
Assurcrédit	1 300	1 521	1 713	1 841	0.23%
Total	754 261	783 100	785 258	788 641	100%

Source: Tunisian federation of insurance and reinsurance companies (FTUSA)

Turnover’s evolution per class of business 2008-2010

As in Algeria, motor insurance remains dominant. It accounts for 46% of the premium income in 2010, followed by life and health classes.

in USD

	2008	2009	2010	Shares 2010
Non life
Motor	341 735 222	362 723 926	362 607 185	46.18%
Health group	104 700 493	110 265 469	102 511 681	13.05%
Workmen’s compensation	-36 570	-34 786	-269 377	-0.03%
Marine	55 977 925	49 647 700	53 097 303	6.76%
Fire	46 627 008	47 325 834	44 339 480	5.65%
Credit	7 312 349	7 260 222	7 085 336	0.90%
Livestock	6 218 940	7 017 209	6 522 125	0.83%
Miscellaneous accident	100 286 368	88 770 700	88 072 419	11.22%
Total non life	662 821 735	672 976 275	663 966 151	84.56%
Life
Total life	86 507 477	102 708 107	113 487 621	14.45%
Total life and non life	749 329 212	775 684 382	777 453 772	99.01%
Acceptances	4 931 936	7 416 420	7 804 676	0.99%
Grand total	754 261 148	783 100 801	785 258 448	100%

Turnover’s breakdown per class of business in 2010

* Including credit, livestock and acceptances Source: Tunisian federation of insurance and reinsurance companies (FTUSA)

Operational performances of Maghreb companies

Algeria

Ministry of Finance © Stayfi [8], CC BY-SA 3.0 (modified) [7]

The performance of Algerian companies is solid but may be affected by corporate competition. Combined ratios remain good even if some deterioration was felt in recent years.

The market is currently at a crossroads, facing several challenges that must be overcome, otherwise recession may be back. Despite an enormous economic potential, the volume of premiums does not take off. The market is still dominated by the motor class whose average premium per vehicle is the lowest in the Maghreb region. For example, the third party liability premium of an average car engine is 12 times as high in Morocco and 7 times as high in Tunisia.

The fire and property damage insurance has been stagnating. Between 2008 and 2011, it grew by just 1.3% despite the presence of large oil risks and the execution of major public projects in recent years.

The situation is worse in marine insurance, whose premiums has gone down by 11% during the 2008-2011 period. Finally, life insurance is far behind compared to the property damage class. In this area, the gap with the other Maghreb countries is important. In Algeria, life insurance accounts for 7.8% of the overall premiums written in 2011 while in Tunisia and Morocco it is respectively set at 12% and 32%.

Main technical highlights: 2007-2011

in millions USD

	2007	2008	2009	2010	2011
Gross written premiums	837	1 001	1 097	1 120	1 148
Technical result*	102	122	101	126	55
Financial income	34	30	32	34	36
Net technical result	136	152	133	160	91
Net profit	19	56	73	107	72
Net profit in % of the gross written premiums	2.28%	5.69%	6.69%	9.54%	6.26%

* Technical result excluding financial income

Tunisia

Habib Bourguiba avenue, Tunis [9], CC0 1.0 [10]

Since 2007, the market has been showing signs of weakness, with premium growth losing momentum and turning insignificant in 2011. The non-life class of business is at a standstill between 2008 and 2010, reporting just 0.17% in premium growth. It is the life sector which drives the market, moving from 86 507 477 TND (67 832 242 USD) to 113 487 621 TND (75 918 679 USD), a growth rate of 31%. As in Algeria, the marine, fire and miscellaneous accident premiums have dwindled down over the years.

After having soared in 2008, underwriting results are in sharp decline in 2009 (-30%) and turning negative in 2010. As to the year 2011, it was impacted by political events in Tunisia.

For some time now, the market has been strained by deteriorating results in motor insurance. Given the narrowness of the other classes of business, it is the motor sector that makes the "result". The deteriorating performance of the motor business, combined with stagnant non-life premiums weakened the market. In addition, in recent years, some major industrial accidents have increased the combined ratio: 89.9% in 2010 and probably more in 2011.

Main technical highlights: 2007-2011

in thousands USD

	2007	2008	2009	2010	2011
Gross written premiums	726 084	754 261	783 108	785 258	788 641
Technical result *	8 392	43 191	29 471	-5 196	-
Financial income	57 224	60 361	66 318	76 467	-
Net technical result	65 616	103 552	95 789	71 271	-
Net profit	56 408	91 807	98 780	75 505	31 710
Net profit in % of the gross written premiums	7.76%	12.17%	12.61%	9.61%	-
Net combined ratio	88.10%	82.50%	96.00%	89.90%	-

* Excluding financial income

Morocco

In recent decades, the Moroccan market has gone through a major restructuring process. Relying on license withdrawals and mergers, the authorities have reshaped the market, encouraging the emergence of large groups. From 2007 to 2011, the written premiums expressed in dirham, went up by 35%. The development of bancassurance has prompted life underwriting. It is in health insurance that Morocco found growth opportunities.

Main technical highlights: 2007-2011

in thousands USD

	2007	2008	2009	2010	2011
Gross written premiums	2 312 980	2 482 459	2 673 990	2 621 018	2 788 893
Technical result *	-97 555	-44 372	2 858	35 120	-106 815
Financial income	1 357 664	544 435	500 014	680 820	677 516
Net technical result	1 260 109	500 064	502 872	715 940	570 701
Net profit	1 071 943	412 279	393 285	457 046	429 796
Net profit in % of the gross written premiums	46.34%	16.06%	14.70%	17.43%	15.41%
Net combined ratio	99.40%	98.70%	94.79%	95.14%	91.10%

* Excluding financial income

As for premiums, underwriting results have also followed a positive trend. The combined ratio has been declining since 2007, when it peaked at 99.4% to finish at 91.1% in 2011. The market is dominated by two large companies, backed by banks: Wafa and RMA Watanya.

Development potential versus constraints in the Maghreb

Twin Center,Casablanca, Morocco © HombreDHojalata [11], CC BY-SA 3.0 [7]

While large differences exist between the markets of Algeria, Tunisia and Morocco in terms of premiums, significant potential for development exists. In a study conducted in May 2012, Standard & Poor’s has taken an optimistic position, maintaining its long-term growth outlooks in life, health and personal lines of business.

The current tightness of personal line and corporate markets suggests a significant premium growth once current problems have been surmounted. This increase is, however, subject to several conditions:

• the modernization of financial markets,
• the creation of new insurance products including takaful insurance,
• the expansion of distribution networks including bancassurance, internet and mobile phone. Direct sales prevails in Algeria while bancassurance is at its first steps. This business is more advanced in Morocco and Tunisia, where banks have a better image. The brokers and general agents craft is poised to grow in Morocco where they are concentrated in large cities. There are 40 insurance intermediaries for 1 million inhabitants in Morocco. They are proportionately twice as many in Tunisia,
• the development of tax incentives to promote long-term savings products just like the initiative taken in Morocco in 2011,
• the extension of compulsory insurance covers,
• tighter controls and the implementation of stricter financial and technical rules.

While growth prospects linger on, some obstacles to the development of insurance are looming ahead. Tunisia, which was severely strained by the Arab Spring, sustained the heavy blow of the economic crisis. Political instability is not favourable to the short-term development of business. Other threats are also noticeable:

• the economic slowdown in Europe and its implications for business in North Africa (56% of exports are going to Europe),
• an ever-growing competition,
• the slowdown in government investments in construction and major projects due to the economic crisis. These investments are the source of growth, particularly in Algeria,
• underdeveloped (almost nonexistent in Algeria) and volatile financial markets,
• in Tunisia, the high household indebtedness reduced savings while short-term consumption is likely to trigger a decline in cash or even an aggravation of the economic crisis in case banks lose control.

Exchange rate as at 31/12 Algeria DZD/USD Morocco MAD/USD Tunisia TND/USD

2008 0.01474 0.12572 0.78412

2009 0.01371 0.1277 0.76309

2010 0.01371 0.11983 0.7009

2011 0.01325 0.11672 0.66896