Index of 500 widely held common stocks that measures the general performance of the market.
South African Large Manager Watch (performance survey of the largest South African investment managers published by Alexander Forbes).
The South African Futures Exchange. This is the exchange where futures contracts and options on those contracts are listed and traded.
The South African Insurance Brokers Association. Later became known as SAFSIA, which merged with the IBC to become the Financial Intermediaries Association of Southern Africa (FIA).
The amount received by an insurer from the sale of property (usually damaged) on which he has paid a total loss to the insured.
FTSE/JSE SA Listed Property Index. Used to measure the returns of property portfolios.
SASRIA Limited (formerly The South African Special Risks Insurance Association). This insurer provides cover against loss from political riot.
See investment contract.
Salomon Brothers World Government Bond Index.
A document forming part of the policy indicating the sum insured, premium period of insurance and applicable information.
Share certificates.
Collateralised loan of securities for a limited time. This involves the transfer of securities from the lender to the borrower with an agreement for the borrower to replace them in due course with identical securities.
Risk is only present at certain times of the year, for example, crop insurance.
A reinsurance treaty required by companies writing business with large sums insured. Examples of business carrying such large sums insured include commercial and industrial property risks. These treaties provide for the lines which are too large to be embraced in a first surplus treaty. A second surplus treaty follows a first surplus but provides a diminished spread of risks to the reinsurer compared with a first surplus treaty. It is possible to have third, fourth and fifth surplus treaties.
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
Investment of certain proportions of a portfolio in certain sectors.
Constituting of a portfolio of stocks of companies in each major industry group.
A mutual fund that concentrates on a relatively narrow market sector. These funds can experience higher share price volatility than some diversified funds because sector funds are subject to common market forces specific to a given sector.
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture .
The process by which financial assets are transformed into securities.
In investment terms it refers to as to the measure of certainty with which one can expect income or that capital will be repaid. It also refers to the measure in which an investment can be traded. Sometimes, however, it includes any investment, whether it can be traded or not.
An arrangement whereby the investments of a particular pension scheme are managed by an insurance company independently of other funds under its control.
A portfolio managed independently by an investment manager from other assets under its control, i.e. an investment portfolio created for one specific client.
The mortality experience of individuals who have been recently checked and approved for insurance on a standard basis. As distinguished from ultimate mortality.
Determination by an insurer of the risks it will insure.
See adverse selection.
Intentional injury caused by the insured to him/herself. This is generally excluded from personal accident policies. In the case of life policies death from suicide is not covered in the first two years of the policy’s existence.
An insured protects their own risk out of their own resources. This can be done via a risk financing arrangement.
A contract rated as a function of its own loss experience.
A bond through which a municipality or parastatal such as Eskom borrows money from the public, in exchange for a fixed repayment plan.
Regular payments deducted and paid to a management company.
An agreement between a service provider and the fund, in terms of which the service provider renders specified services to the fund.
The daily payment of net sums of money by an exchange's users to each other, after the clearing process has been completed. This is usually carried out by banks acting as settlement agents on behalf of users.
Schemes whereby listed companies offer their staff equities or options to buy equities at favourable prices.
Process whereby an investment manager actively selects shares that it believes will outperform the general market.
Identifies the degree to which the investment manager allows the selection of specific companies to drive the portfolio's returns. The higher this number, the more the manager selects shares distinctly different from the market as a whole.
Person or entity that owns shares or equity in a corporation.
See "Equity".
The ratio of annual return minus the risk free rate of return (e.g. long term government bond yield) and the annualized standard deviation. The Sharpe ratio is an example of a risk-adjusted return. This is a measure that describes the efficiency or value added by the manager for each unit of risk taken.
An excess of sales over purchases of an asset. Also, if an investor is in a situation where he benefits from a decrease in the value of an asset, currency or sector, he is said to be “short†the asset, currency or sector.
Bonds with short (not much time to maturity) current maturities.
A special rate applied to insurance of a shorter duration than the normal annual period. The rate will be more than the pro-rata proportion of the annual rate. Sometimes the term refers to a refund that is calculated on a short rate such as where the policyholder requests a mid-term cancellation.
This strategy is based on the sale of securities that the fund manager considers overpriced in anticipation of buying them back at a lower price for a profit. For, example if a company\'s stock is highly priced compared to its historical value, or if its business model seems flawed, the Short Sellers fund manager may decide to short it. This strategy is effective if the manager can correctly predict a falling market.
Insurance under which claims are typically settled within one year of the occurrence of the events giving rise to the claims.
The statutory annual return submitted by every short-term insurance company to the Financial Services Board within four months after its financial year end. The return deals with matters such as statutory solvency, asset spreading and risk management.
Defined in the Short-term Insurance Act as providing benefits under short-term policies which means engineering policies, guarantee policies, liability policies, miscellaneous policies, motor policies, accident and health policies, property policies or transportation policies or a contract comprising a combination of any of those policies. In the United States this is commonly referred to as property and casualty insurance and in the United Kingdom as general insurance.
The Short-term Insurance Act No. 53 of 1998, which provides for the registration of short-term insurers, the control of certain activities of short-term insurers and intermediaries and for general matters connected with the short-term insurance industry.
An entity registered or deemed to be registered under the Short-term Insurance Act.
Calculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values.
Simple interest is straight forward interest, for instance, if you invest R1 000 at a simple interest rate of 12% per year, you will earn interest of R120 making your saving a total of R1 120 after the first year. For as long as your money is invested you will earn 12% per year, i.e. R120, that is added to your original investment of R1 000.
An annuity covering one person. A straight life annuity provides payments until death, while a life annuity with a guaranteed period provides payments until death or continues payments to a beneficiary for a guaranteed term, such as ten years.
The first and only premium required to provide the insurance benefits in a policy.
A whole life insurance policy requiring one premium payment, which accrues cash value much more quickly than a policy paid in installments.
A means of repaying funds advanced through a bond issue. The issuer makes periodic payments to the trustee, who retires part of the issue by purchasing the bonds in the open market. This means that every period (usually every year) a company will pay back a portion of their bonds. An example would be a company that issues R20 million in bonds with a 20 year maturity and pays back R1million worth of bonds every year at par. This is decided purely randomly, if the bond is trading above par value then you will lose, but if the bond is trading below par then you\'ll gain...it\'s pure luck of the draw.
A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.
A contract, other than a life policy, in terms of which a person, in return for a premium, undertakes to provide one or more sums of money, on a fixed or determinable future date, as policy benefits, and includes a reinsurance policy in respect of such contract.
Differentiates between large and small capitalisation shares.
The situation in which a treaty-ceding commission fluctuates according to treaty results.
The commonly used term for underwriting slips.
Also called micro cap funds, these seek maximum capital appreciation by investing in smaller companies with a high growth potential. These companies fall outside the top 100 largest shares on the JSE and by nature these funds tend to be more volatile than those that are diversified across the whole of the JSE. New investment by these funds is restricted to small cap shares, and at least 75 percent of the fund must be invested in small cap shares at all times. The attraction is that these companies, although small, often offer higher than average growth potential. The benchmark is the JSE Small Cap Index.
Small company funds seek maximum capital appreciation by investing in both established smaller companies and emerging companies. New investment by these funds is restricted to small and mid-cap shares and at least 75 percent of the fund must at all times be invested in shares which fall outside the top 40 JSE listed companies by market capitalisation. Due to their nature and focus these funds may be more volatile than those that are diversified across the broader market. There is no benchmark yet.
An investment portfolio set up by an insurer in which the investment returns are smoothed over time. Investment returns are distributed via a bonus declared yearly by the insurer. In good years, some of the returns are held back as reserves that are used to supplement returns in bad years.
The sole proprietorship is a business which is owned by one person in his own name, administered to his own advantage, and exclusively and fully at his own risk and responsibility.
Is a measurement of the financial strength of a short-term insurer. It represents the shareholders’ funds, expressed as a percentage of net premium income. This method of measurement is generally accepted internationally. In South Africa the statutory basis is commonly referred to by the Registrar of Insurance as the net asset ratio. This is because assets and liabilities are stated at values which are adjusted in accordance with the provisions of the Short-term Insurance Act.
This measures whether the return in excess of a specified benchmark was sufficient to cover the downside volatility/risk inherent in the investment. This ratio is useful to measure potential under-performance rather than the volatility that arises from out-performance.
A term used to describe the specific acceptance by reinsurer of a risk normally excluded from a treaty.
Extra risks added to a policy not originally designed to cover those risks.
Unit trusts with a higher risk profile than general equity unit trusts. They have exposure to a selected sector of the securities market.
In contrast to a balanced mandate, it requires a manager to invest in only one particular asset class, and sometimes one specific area of that asset class.
Refers to actively picking stocks having unique characteristics not captured by the style and industry factors of the BARRA model.
Securities that involve a high level of risk.
Split investment products come in many forms. One company offers you a single unitised investment product. The unitised investment product in turn offers a variety of investment choices provided by one or more companies. The advantage for the investor is greater investment flexibility through wider investment and company choices. Switching between investments and companies is a further feature of split investment products.
The difference in yield between a government benchmark bond and another fixed-income instrument with the same coupon rate and redemption date, due to a difference in the perceived credit-worthiness of the issuers.
A type of excess of loss reinsurance designed to pay certain losses over a given or stipulated amount and to average such losses out over a period of years. Five years is the usual period. The premium is adjustable within fixed minimum and maximum limits according to the ceding company’s experience. Such a treaty protects the ceding compan against shock losses and spreads their cost over a predetermined number of years. It is also known as a time and distance policy.
A current member, including an active member, a pensioner and a deferred pensioner, a former member and an employer participating in the fund.
A measure of the spread around the mean of any series of observations e.g. returns. (the standard deviation of annualized returns is also known as volatility)
Persons that have a normal life expectancy.
An account statement received after each transaction.
In relation to a fund, means an investigation by an actuary / valuator contemplated in Section 16 of the Pension Funds Act.
An actuary appointed in accordance with section 20(1) or 21(1)(b) of the Long-term Insurance Act.
Technical provisions calculated in terms of the Short-term Insurance Act and Long-term Insurance Act.
Short-term Fixed Interest Call Deposit Index. The SteFI Call is used as a benchmark for measuring the performance of short term fixed deposits.
Also known as Stock Selection or Share Selection. The process whereby an investment manager actively selects shares to invest in, that it believes will outperform the general market.
A specialised form of excess of loss reinsurance, usually applicable to certain lines of insurance showing wide loss variation. For example, hail insurance, where four good years might be followed by a calamitous one. Stop loss reinsurance differs materially from the usual excess of loss treaty as the reinsurer is not responsible for the amount by which any individual claim exceeds a fixed sum, but instead indemnifies the ceding company in respect of an annual loss ratio on a particular portfolio in excess of a stipulated level. Normally the terms of such a reinsurance contract are designed to achieve a guaranteed profit to the ceding company. The limit of indemnity provided by the reinsurer is usually expressed both as a percentage of the premium income and as a monetary figure, the limit being whichever is the lesser amount.
The price at which the holder of an option has the right to buy/sell the underlying asset.
Any Cerebrovascular incident(or accident) producing neurological sequelae lasting more than 24 hours, including: i. Infraction of the brain tissue, ii. Haemorrhage of an intercrania vessel, iii. Embolisations from an extracranial source.
Structured funds are a type of multiple-manager fund. Again the principle of unitisation is applicable with structured funds, where the structured fund management company is free to invest in any proportion of any investment type within the limits of the fund`s mandate. The structured fund consists of underlying investment portfolios which are managed by different asset managers. The structured fund manager then manages the aggregate portfolio which now falls into the structured fund, again in terms of a specific mandate. The importance of a good computer software system is again a feature of this fund. It is important to note that, although a structured fund eliminates the need for switching, offshore asset swaps are not allowed in terms of exchange control legislation.
Indicates the degree to which an investment manager allows a particular investment style to dominate the returns of the portfolio.
Insurance of persons who do not meet the standards set for insurance at regular rates. Sub-standard insurance may be issued for physical, moral, or mental reason, or because of occupation, residence, etc. Also known as impaired lives.
The statutory or legal right of an insurer to recover from a third party who is wholly or partially responsible for a loss paid by the insurer under the terms of a policy. For example, when an insurer has paid the insured for loss sustained to his car as the result of a collision, the insurer may collect, through the right of subrogation, from the person whose car caused the damage. Subrogation recoveries are treated as reductions of losses paid.
Identifies recently successful stocks, assessing historical alpha, rate of return, return on capital employed, earnings per share, growth rate and return on assets.
A provision in a life insurance policy that excludes the risk of death by suicide (sane or insane) from coverage during a specified period (usually two years) from the date of issue. In the event of suicide within this period, there is usually a refund of premiums paid.
The stated monetary amount or amounts of indemnity or cover under an insurance policy.
An individual or corporation that guarantees the performance or actions of another.
The actual undergoing of surgery for a disease of the aorta needing excision and surgical replacements of the diseased aorta with a graft. For the purpose of this definition aorta shall mean the thoracic and abdominal aorta but not its branches. Traumatic injury of the aorta is excluded.
The excess of the actuarial value of assets over the actuarial value of liabilities on the basis of the valuation method used. The amount by which the total value of assets of the long term fund exceeds the liabilities to policyholders.
This is second amendment to the Pension Funds Act which was promulgated on 7 December 2001.
An agreement whereby the ceding company is bound to cede and the reinsurer is bound to accept the surplus liability over the ceding companies retention limit. This limit is referred to as a line and the surplus treaty is often expressed in lines.
A type of reinsurance, usually on a whole account basis. It is designed to relieve a ceding company, by reducing premium volume, of the necessity to increase its capital in order to maintain solvency.
Returning a life insurance policy to the issuing life office for cancellation, prior to its maturity date or the death of the life insured, in return for the payment of its surrender value.
A deduction from the policy reserve made by the insurance company in computing a cash-surrender value. The deduction is necessary to permit the company to recoup its issue and administrative expenses.
The surrender value of a policy is the value that the assurer is prepared to pay out to the policyholder on early termination of the policy contract. Penalties are associated with early termination of the contract, which are designed to encourage the policyholder to honour the terms of the contract until maturity, reduce the amount paid out on early surrender to below the actual intrinsic fund value of the policy. In addition termination of the contract within the extended restriction period, generally within the first five years of the inception date of the policy, results in especially punitive penalties by the Assurer. This is in accordance with Article 59D of the Life Assurance Act as amended. The Life Assurer is only compelled to pay out on termination within the extended restriction period the sum of premiums plus 5% compounded growth on the premiums paid.
A policyholder’s net cash outlays with respect to a surrendered policy. It is equal to the sum of all premiums paid reduced by the sum of all dividends received and further reduced by the cash value of the policy at date of surrender.
The regulation of a market by authorities, ensuring that its rules are observed and that traders are always financially able to meet their trading commitments.
Annuity (pension) payable to a nominated person (usually spouse) after the death of the original annuitant. If the nominated person dies prior the death of the annuitant no amount is payable. This is also called a survivorship benefit.
The transfer of money between investment portfolios.
Created to alleviate the problem of a small number of companies making up a large portion of an index. It reduces weightings by foreign shareholdings and makes adjustments for cross-holdings and strategic holdings.
A group of individuals or companies at Lloyd’s who pool resources to underwrite risks.
