N° 72 : Position of the main French insurers in 2015

As regards life insurance, overall net inflows grew by over 20% in 2015 to stand at EUR 11.1 billion. This general trend, however, masks disparities between the instruments: while net inflows more than doubled for unit-linked products (to EUR 6.6 billion), they decreased by 26.3% for euro-denominated products (EUR 4.5 billion).

In addition, the profitability of the sector increased largely as a result of a rise in the underwriting margin and lower taxes: net income posted an increase of 32.2% and return on equity climbed to 11.3% (+2 percentage points). These positive developments should nevertheless be put into perspective: unrealised gains on investments recorded a decline of 10%. Consequently, the solvency margin cover ratio under Solvency I declined and stood at 422% (-52 percentage points (pts)) and economic wealth decreased significantly.

The continued decline in return on investment, which amounted to 3.43% on average in 2015 against 3.46% in 2014, is reflected in the rates paid to policyholders, which also followed a downward trend. However, this situation is based on non-recurring income generated by the realisation of unrealised gains on variable income securities. Thus, the persistence of a low interest rate scenario is notable for the ACPR as it is likely to penalise life insurers in the long term: indeed, the yields on securities in portfolios are lower than the rates on life insurance policies and this phenomenon is particularly strong when the inflows on euro-denominated contracts are substantial. It is therefore important that insurers not be fooled by a still favorable financial situation and exercise the utmost restraint in setting the revaluation rates of their insurance contracts in order to maintain their viability over time.

In non-life insurance, sales amounted to EUR 96.56 billion in 2015, up by 2.3% compared to 2014. The breakdown by category of operations shows that premiums increased in the main categories, in particular casualty insurance (+ 2.7%), personal property insurance (+3.7%) and motor insurance (+1.3%). Overall, the combined ratio improved somewhat (-0.4 pt) to stand at 98.4% in 2015. It remained above 100% for group casualty insurance, motor insurance and construction liability insurance.

Despite the context of falling interest rates, the average return on investments stood at 3.63% in 2015, unchanged compared to 2014. The underwriting profitability increased by 0.2 percentage points in 2015 to stand at 4 3% of earned premiums. Despite a much higher non-life underwriting income, which reached its highest relative level since 2010, the return on equity of the sector dipped slightly from 6% to 5.9% in 2015. Lastly, the sector benefited from an increase in unrealised capital gains and equity which enabled the solvency margin cover ratio to rise by 24 pts to 627%.