N° 52 : Position of the main French insurers in 2014

As regards life insurers, overall net inflows almost doubled in 2014 (+80% to 9.2 billion euros) but more than tripled for unit-linked contracts. Unrealised capital gains on investments nearly doubled, mainly reflecting the decline in interest rates in 2014. Consequently, the solvency ratio under Solvency I showed a strong increase, hitting 464% (+162 percentage points (pts)), and economic wealth has improved considerably.

These positive developments should nevertheless be put into perspective: return on investment (ROI) continued to slide to reach 3.5% on average at end 2014, and this development weighed on insurers’ financial margins, even though overall policyholder rates reduce slightly faster. The spread between insurers’ ROI and their distribution ratio narrowed from 93 basis points (bps) in 2006 to 64 bps in 2013, with one-fourth of organisations even posting a negative differential in 2014. In addition, the sector's profitability was reduced under the effect of eroding underwriting margins and a greater tax impact: the net income fell by 2.5% and returns on equity (ROE) stood at 9.3% (-0.6 pt).

Although, in the short term, the decline in yields has improved the solvency ratio in 2014 by temporarily increasing unrealised capital gains on bonds, the persistence of a low interest rate environment is a factor of attention for the ACPR, because it is likely to penalise life insurers; in the context of its supervisory process, the ACPR is paying special attention to the impact of these rate changes on the resilience of the sector as a whole and of each organisation individually. To complete its analyses, the ACPR asked the organisations to review the impact of adverse scenarios in the context of the ORSA (own risk and solvency assessment) set forth by Solvency II, for September 2015.

In non-life insurance, the turnover continued to grow in 2014. At constant scope, the amount of premiums issued increased by 3.5% from 2013. However, it worsened for transport insurance, construction insurance and credit insurance, in a still gloomy economic environment. The overall combined ratio for non-life insurance improved somewhat (-0.4 pt) to stand at 98.7%. Nonetheless, for group casualty insurance, motor insurance and construction liability insurance, the combined ratio stayed above 100%.

Financial margin was still at 2013 level with the ROI unchanged at 3.6%. Ultimately, underwriting income as a percentage of premiums improved, reaching 4.2% at end 2014 (+0.7 pt). However, after-tax income was down due to non-technical factors (income from life insurance activity, income tax). Consequently, the ROE was down slightly (-0.4 pt) reaching 5.7%. Finally, as with life insurance, the sector benefited from brighter market conditions and the at least temporary rise in unrealised capital gains, which allowed an improvement in the solvency ratio, which rose to 603%, up 35 pts.