Life insurance exceeds 1,900 billion euros in outstandings

2023-07-27 17:11:00

Life insurance returned to positive net inflows in June (1.7 billion) following the poor performance in May, according to the latest figures from France Assureurs. The rebound in gross collection (+30%) is no doubt explained by a catch-up effect with the succession of long weekends and public holidays in May.

In the first half, net inflows totaled 4.1 billion euros, the result of net inflows of 19.5 billion euros on unit-linked units and outflows of 15.5 billion on the euro fund. Outstandings held in life insurance accumulate and cross for the first time in its long history the threshold of 1,900 billion, to 1,911 billion exactly, distributed between 1,381 billion on the fund in euros (with guaranteed capital, invested mainly in government or risk-free bonds) and 528 billion in units of account (capital not guaranteed but invested in more diversified assets, notably in equities). In 2006, life insurance outstandings had exceeded 1,000 billion euros.

Structural outflow from the fund in euros

Net inflows in the first half of 2023 are however three times lower than last year. And above all much less than that of the Livret A (25.8 billion accumulated over the same period).

« This result is below the average for life insurance in recent years. In 2022, net inflows for the first half were €9.5 billion. Before the health crisis, in 2019, it had amounted to 14 billion euros. There is undeniably a rate of return effect”comments Philippe Crevel, director of the Cercle de l’ANDpargne.

The outflow from funds in euros is, in fact, structural, repeat the insurers, because around 60% of the contributions are invested in the latter, while the benefits (outflows) are taken from the outstandings (72%). In concrete terms, for every ten euros invested in life insurance, six go towards funds in euros, while for every ten euros withdrawn, seven euros automatically leave the funds in euros. Nothing to do therefore, according to France Assureurs, with possible competition from the Livret A.

The explanation can be understood, especially since outings have been increasing for several months, with even a jump of 21% in June. Over the first six months of the year, they rose to 77.7 billion, an increase of 19% over one year. It’s a lot.

This increase in benefits, which mechanically accelerates outflows from the euro fund (outflows from unit-linked units are more marginal), is explained first of all by inflation, with savers starting to dip into their savings.

Effect of mortgage

There is also another explanation, related to the real estate market. “The rise in interest rates, and the more restrictive mortgage loan conditions, mechanically leads households to increase their personal contribution and therefore to dip into their savings, in particular life insurance”explains Franck Le Vallois, Managing Director of France Assureurs.

“In France, as in most other continental European countries, savings are allocated as much, if not more, to financing housing investment as to financial uses. (…). When credit is rarer and more expensive, the ability to invest in financial assets is more limited.confirms in a study by the BPCE Savings Observatory.

“With an expected decline in home loan production of around 30% in 2023 and an increase in outstandings of less than 2% (compared to 5% to 6% in previous years), the scarcity of credit in France should make a major contribution to the reduction of financial flows in 2023 and 2024”add the BPCE experts.

New record for Livret A with net inflows of nearly 26 billion euros

For Philippe Crevel, there is also an arbitrage effect with exits from the euro fund used to reallocate savings to units of account or other investment products, such as regulated savings accounts. This perhaps explains the good collection performance of units, which now represent 41% of gross collection in June.

What is certain is that savers continue to save despite everything, with a rate that should remain exceptionally high (17.8% in 2023 and 17.6% in 2024, according to BPCE). This will not prevent flows on financial investments from continuing to fall.