After suffering a sharp setback in 2008, France’s life insurers
are enjoying a rebound in premium income thanks primarily to a
significant fall in interest rates on competing savings products
offered by banks. Life insurers’ profitability is, however, being
constrained by a slump in high-margin, unit-linked products.
Economic turmoil took its toll on France’s life insurance market in
2008, leaving gross written premium income down 10.6 percent
compared with 2008 at €122.6 billion ($183 billion). Particularly
significant in the premium income decline was a slump in sales of
unit-linked products and competition from higher interest rates
available short-term bank accounts.
Last year’s setback for Europe’s second-largest life insurance
market and the world’s fourth-largest ended a lengthy period of
solid growth that had seen premium income rise from €90.25 billion
in 2000 to €137.1 billion in 2007.
This growth came against the background of France’s modest GDP
growth of about 2 percent annually during the period and boosted
the life industry’s market penetration rising from 6.6 percent of
GDP in 2000 to 7.3 percent in 2007.
Based on data supplied by the Comité Européen des Assurances (CEA),
the European federation of insurers and reinsurers, the French life
industry’s performance during the 2000 to 2007 period placed it
among the leading performers in Western Europe.
Indicatively, premium income in Europe’s largest insurance market,
the UK, reflected a CAGR of 5.9 percent between 2000 and 2007while
Europe’s three next largest markets, Germany, Italy and the
Netherlands, achieved CAGRs of 3.7 percent, 6.4 percent and 1.5
A notable feature of the French life industry’s performance in 2008
was a modest decline in the importance of banks as a distribution
channel. According to the CEA, banks accounted for 60 percent of
total life insurance premium income in 2008, down from 62 percent
Assessing the reasons for the decline in the role of banks,
Benjamin Serra, a Paris-based analyst with rating agency Moody’s
Investor Services, attributed it to two key factors. Firstly, in
order to the liquidity position of their banking operations, banks
were focused on selling bank savings products.
Secondly, bancassurers are the most active in the hard-hit
unit-linked segment which, according to insurance industry body
Fédération Française des Sociétés d’Assurances (FFSA), saw sales in
the first half of 2009 plunge 76 percent compared with the first
half of 2008.
The decline in the importance of bank distribution should not be
misconstrued. As Serra stresses, in France “banking remains a
powerful distribution channel.”
Indeed, the bancassurance model first took root in France as far
back as 1971 when regional banking group Crédit Mutuel established
Assurances du Crédit Mutuel to provide loan protection insurance
directly to its clients via its branch network.
However, despite this early start France takes backseat to the UK
where Barclays Bank can lay claim to having been the first entrant
into bancassurance with its establishment of Barclays Life, in
But it was in France and not in the UK that bancassurance really
flourished with significant impetus provided in 1984 by an
amendment to French law that permitted credit institutions to widen
their scope of activities.
Development of the bank distribution channel in France has also
been assisted to a considerable extent by the tax advantage life
insurance products enjoy. Consultancy Milliman points out that in
France individual life insurance products are essentially
medium-term savings products benefiting from tax exemptions on
interest and capital gains when policies are held for a minimum
The market share of banks grew rapidly and by 1990 bancassurance
already accounted for 39 percent of total life insurance premium
income generated in France. This rapidly rising trend continued
unabated with the banking channel’s share of life premium income
reaching 59 percent in 1998, according to the CEA.
Thereafter the pace of market share growth slackened with the
bancassurance channel’s share of premium income stabilising at
around 62 percent. An exception was 2006, when the bank channel’s
market share jumped from 62 percent the previous year to 64
percent, an all-time high.
This increase in market share was attributable to a change in the
tax treatment of Plans Epargne Logement (PEL) which are regulated
savings products that allow individuals to save for property. In
2006 interest earned on PELs for over 10 years became taxable,
prompting many PEL-holders to transfer their funds to life
Milliman estimates that €11 billion was transferred from PELs to
life products and generated 9 percent the life insurance market’s
growth out of a total growth rate of 17 percent in 2006. The
transfers to life products benefited mainly bancassurers as they
were able to target PEL holders.
In 2006, Milliman noted that banks generated average life insurance
premium income of €2.51 million per branch. This was the highest of
all major bancassurance markets and, for example, compared with
€2.38 million per branch in Belgium, €1.73 million in Italy, €1.66
million in Portugal and €0.45 million in Spain.
France has, however, not retained its place as the world’s largest
bancassurance market in market share terms. In 2007, top position
was occupied by Portugal where, according to the CEA, the bank
channel accounted for a massive 87.3 percent of life insurance
premium income. Portugal was followed by Italy at 66.3 percent and
Spain at 63.2 percent.
Rebound in sales
In terms of premium income the French life insurance industry is
enjoying a recovery in 2009. Serra explained that this can be
attributed to an increase in demand for traditional life insurance
products thanks to reduced competition from other savings products
on which interest rates have fallen to very low levels.
For example, Livret A savings accounts, which are widely offered by
banks in France, offer a yield of just 1.25 percent.
The recovery was evident in the first nine months of 2009 with the
FFSA reporting that life industry’s premium income had increased by
10 percent compared with the same period in 2008 to €104 billion.
This represented an improvement on the 6 percent increase in
premium income reported by the FFSA in the first half of 2008 and
puts the French life industry on track to equal or better premium
income of €137 billion recorded in 2007.
Serra believes bancassurers are well positioned to benefit from the
rebound in French life insurance sales and appear set to regain
market share in 2009.
Underscoring this outlook, the country’s largest insurer,
bancassurer CNP Assurances, reported premium income from its French
operations of €20.06 billion in the first nine months of 2009, up
13.6 percent compared with the same period in 2008. This resulted
in CNP Assurances improving its market share from 18.8 percent in
2008 as a whole to 19.3 percent.
In a statement accompanying its third-quarter 2009 results, CNP
Assurances highlighted that the trend towards insurance-based
products was mainly driven by low short-term interest rates.
This is highlighted by CNP Assurances’ new business results which
in net new inflow terms amounted to €7.4 billion in the first nine
months of 2009, a 48 percent increase compared with the same period
in 2008. This was well ahead of a 37 percent increase in net new
inflow recorded by the life industry as a whole.
CNP Assurances also reported that its unit-linked product sales in
the first nine months of 2009 fell 68 percent to €576 million due
to clients’ continued “marked preference for lower risk
Also indicating resurgence in bank channel sales, France’s second
largest bancassurer Crédit Agricole also reported a strong rebound
in business in the first nine months of 2009.
During this period the bancassurer’s insurance division Crédit
Agricole Assurances’ life unit Predica recorded a 14 percent
increase in premium income compared with the same period in 2008 to
Predica’s strong results saw it improve its market share from 12.8
percent in 2008 as a whole to 15.1 percent. Net new inflows
recorded by Predica in the first nine months of 2009 were up 60
percent compared with the same period in 2008.
A recovery in premium income is also evident amongst France’s
traditional life insurers, including the largest Axa which based on
premium income of €15 billion in 2008 ranked third overall in the
French life market. Based on its market capitalisation of €38.8
billion as at 10 November Axa also ranks as Europe’s largest
insurer, marginally ahead of Allianz which was capitalised at €38.2
Keeping pace with its major bancassurance competitors Axa reported
that on an annualised premium equivalent basis its premium income
in the first nine months of 2009 had increased by 14.1 percent
compared with the same period in 2008 to €1.12 billion.
Premium income derived in France represented a quarter of Axa’s
total premium income of €4.51 billion in the first nine months of
2009. This was up from 19 percent during the same period in 2008
and reflected a 12.7 percent fall in Axa’s premium income across
all its major foreign markets.
Also reporting a strong rebound in business was Generali France,
the French unit of Italian insurer Generali Group and based on 2008
premium income of €10.6 billion, the fourth largest life insurer in
France. In the nine months to 30 September 2009, Generali France
generated gross premium income of €9.84 billion, up 13.1 percent
compared with €8.7 billion recorded in the first nine months of
Generali France’s performance outpaced that of its parent company
in Italy where it reported premium income of €8.1 billion in the
first nine months of 2009, down a significant 24.4 percent compared
with the same period in 2008. This left Generali France as
Generali’s largest unit and responsible for just over a quarter of
total group life premium income of €32.07 billion.
Based on new business, Generali reported that Generali France
generated €984 million on an annualised basis in the first nine
months of 2009, up 13.4 percent compared with the same period in
2008. This was by far the best performance of any of Generali’s
operations and compared with an 14.6 percent fall in Italy to €881
million, an 8.6 percent fall in Germany to €730 million and a 15.9
percent fall in Central and Eastern Europe to €117 million.
However, based on its profit contribution Generali France did not
fare particularly well with its operating profit slipping 17.8
percent in the first nine months of 2009 to €315.5 million. Italy
remained Generali’s primary profit generator despite operating
profit sliding 34 percent to €755.3 million.
Generali’s biggest foreign rival in France, Allianz’s French unit
AGF Allianz did not fare as well in terms of premium income which
slipped 5.3 percent in the first nine months of 2009 to €5.18
billion. In terms of profit France, Allianz’s biggest market
outside of Germany, produced a 60.4 percent increase in operating
profit to €587 million in the first nine months of 2009. This
exceeded the operating profit of €526 million reported by Allianz
on its German life insurance operations.
Allianz acquired the outstanding 42.4 percent of AGF that it did
not own in 2007 for €6.8 billion in cash and €3 billion in Allianz
All is not well
Despite the recovery in premium income evident in 2009 Moody’s has
taken a downbeat view on overall prospects.
“The fundamental credit outlook for the French insurance market is
negative,” Serra said in his assessment.
He continued that the negative outlook primarily reflected pressure
on insurers’ capitalisation arising from asset risk and weakening
profitability of both life and non-life insurers and the industry’s
overall reduced financial flexibility. This view is consistent with
Moody’s negative outlook for the European insurance industry as a
whole, he noted.
In the life insurance industry Serra anticipates that lower
financial results and an unfavourable business mix – specifically
reduced demand for unit-linked products that have traditionally
generated higher margins in France – will weigh on life insurers’
“We also regard life insurers’ capitalisation as stretched, with
reduced buffers to absorb any shocks on asset portfolios,” said
He anticipates that the recent deterioration in the financial
strength of banks could reduce their implicit support for their
Looking further ahead, Serra noted that Moody’s believes the French
insurance market could still benefit from long-term opportunities
because of the need to offer a wider range of product solutions to
an ageing population is strong. This is especially the case in
long-term care insurance products, said Serra.
However, he concluded that development of such products is linked
with proposed legislation which Moody’s understands will require
many consultations before it can be implemented.