2023-06-16 04:00:15
Good news for life insurance funds in euros! Rising interest rates allow companies to reinvest the money savers put into them in high-yielding bonds.
But the shift cannot be taken in a few months. Some 1,382 billion euros (end of April 2023) are, according to France Assureurs, invested in these funds in euros, life insurance guaranteed capital supports. New investments, made on more advantageous terms, therefore represent only a drop of water in this ocean of savings. “It takes six to eight years to renew half of the titles purchased in the past under unfavorable conditions”points out Gildas Robert, partner within the consulting firm Optimind.
“Because of this inertia, the funds in euros should therefore serve, for 2023, returns lower than those of other investments on the market”he continues. In the short term, the situation is therefore delicate. Because the competition is fierce, starting with that of the Livret A. Paid at 3% net of tax and social security contributions since February, it might see its rate rise to 4% or more on 1is august.
In addition, insurers bear another effect of the rise in interest rates: the fall in the value of their portfolio, consisting of at least two-thirds of government bonds, financial institutions or companies. “Insurers experienced an average drop in value of 12% on this bond segment in 2022”believes Cyrille Chartier-Kastler, founder of the Good Value for Money site.
Blocking withdrawals?
A striking example is that of Sogécap, the life insurance company of the Societe Generale group. Its bonds showed 5.6 billion euros in unrealized capital gains (difference between the market value and the purchase value) at the end of 2021; at the end of 2022, these securities had an unrealized loss of 3.8 billion! In one year, more than 9 billion have evaporated… And this case is not exceptional. “The whole market is in a situation of capital loss on bond investments”judge M. Chartier-Kastler.
These capital losses remain latent until the securities are sold. However, an insurer normally keeps the bonds until they are reimbursed by the issuer, at their original price. The loss is therefore theoretical, unless you are forced to sell before the term and materialize the capital losses. This may sometimes be necessary to return the money to the savers.
“In theory, insurers seek to match bond redemptions with redemptions [retraits] predictable from customers”, underlines Romaric Chalendard, founder of the consulting company Castom. Thus, when you want to recover your savings, they do not have to sell the sum corresponding to your capital on the markets, they are content to use the cash that comes in to pay you your due.
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