Reinventing long-term savings and protection insurance with our partners
Building a climate of confidence
Life insurance, a new environment
In 2014, life insurance was the main growth driver not only for CNP Assurances but also for the French insurance market as a whole, although the persistently low interest rates upset the market.
“For me, life insurance is 40% for my retirement, 40% for the children and 20% for a rainy day, for example if I lose my job.” This vision of life insurance expressed by a 40-something during a qualitative survey conducted by CNP Assurances clearly shows that, up to now, life insurance has been the perfect solution to the multiple needs of savers.
A surge in new money
Net new money (deposits less withdrawals) invested in the French life insurance market in 2014 totalled €21 billion (source: Fédération Française des Sociétés
d’Assurances - FFSA). Although still well below the €50 billion recorded in 2009 and 2010, this was nonetheless nearly double the 2013 figure. Life market technical reserves grew 4% over the year, to €1,515 billion, representing close to 75% of total technical reserves. CNP Assurances’s life business also recorded positive net new money in 2014, totalling €3.1 billion (1). In 2014, CNP Assurances’s average technical reserves for the life, savings and pensions businesses totalled €295 billion (2).
An extraordinary fall in interest rates
In 2014, interest rates tumbled, with the 10-year OAT (3) rate dropping from 2.50% to less than 1% at the year-end and to 0.60% in early 2015. The Banque de France instructed insurers to slash policyholder yields to preserve their ability to fulfil their short and long-term commitments and ensure that their business models continued to be sustainable.
The average yield on traditional life insurance contracts stood at 2.50%, down 0.30 points on 2013 (source: FFSA). The yields paid by CNP Assurances through its partners followed the market trend. At between 1.80% and 2.70% for contracts distributed by La Banque Postale and the Caisses d’Epargne, they remained well above the rates earned on government bonds, which represent the principal asset class in all insurers’ portfolios.
A long-term approach
The multi-layered asset portfolios built up over the years allow us to smooth the yields paid to policyholders. However, with the low interest rate environment looking set to last, we have held firm to our prudent management approach and long-term vision by increasing our reserves, particularly the policyholders’ surplus reserves allocated to our two main distribution partners in France, the Caisses d’Epargne and La Banque Postale. At end-2014, aggregate policyholders’ surplus reserves represented 2.42% of our total technical reserves, versus 1.92% at the previous year-end.
Policyholders on the trail of performance
French people looking for above average performance are choosing unit-linked products, which are managed using more dynamic investment strategies. Unit-linked contracts represented 16.6% of French life insurance new money in 2014 and 17.2% of market technical reserves. We have been promoting unit-linked funds for several years now. In 2014, this marketing strategy drove sharp growth in unit-linked sales, with gains of 78.7% in France and 41.1% in Europe (excluding France). The strategy is supported in particular by the new Cachemire 2 and Cachemire Patrimoine contracts distributed by La Banque Postale, for which the unit-linked weighting stands at 17% and 31.1% respectively. The proportion of new money invested in unit-linked funds by Caisses d’Epargne customers rose by over three points to 14.9% at end-2014. These advances attest to the networks’ success in convincing customers to accept part of the investment risk.
1. Management reporting data comparable to the industry data published by the FFSA
2. Excluding the deferred participation reserve
3. French government bonds (Obligations Assimilables du Trésor français)
Never before have we seen such low nominal interest rates in Europe.
Identifying high potential investments
Mikaël Cohen, Investment Director
“Never before have we seen such low nominal interest rates in Europe. To meet this challenge, we are stepping up our portfolio diversification strategy. We are increasingly focusing our fixed income investments on assets that contribute to financing the economy, including listed corporate bonds and units in corporate bond funds, but also bonds issued by unlisted mid-market companies. We also purchase equities throughout the year, with a focus on companies involved in major real estate or infrastructure projects. It takes all of CNP Assurances’s expertise to identify high potential investments while avoiding the risk of capital losses.”
2.50%average yield paid to holders of traditional life insurance policies in 2014 (source: FFSA).
0.60% interest earned by insurers on 10-year OATs purchased at the end of February 2015.
eurocroissance, Reinventing long-term savings solutions with our partners
As the perfect portfolio diversification vehicle, a natural driver of performance and an ideal pension product, Eurocroissance epitomises life insurance products of the future.
Helping eurocroissance get off to a good start
As soon as the final legal texts were published last September, we put our experts to work and tested this new life insurance concept among customers to assess their appetite for risk and come up with the arguments that would convince them to switch. Sixty savers representing all profiles (high net worth and retail, active and retired, risk-averse and risk-tolerant) took part in the survey. They viewed Eurocroissance as an additional option for growing their capital, appreciating its positioning midway between traditional life insurance and unit-linked contracts, the ability to improve eroding yields and the options that allow managers to take advantage of market opportunities.
We intend to leverage all of these strengths to build confidence in this innovative product.
Low interest rates have changed the equation
For many years, life insurance, which allows savers to make withdrawals at any time, combined the flexibility of Livret A accounts with considerably higher returns and an attractive tax treatment. This vision of life insurance familiar to all French people is changing beyond recognition. As France’s leading personal insurer, we have a duty to explain to as many savers as possible that with today’s very low interest rates, the situation is no longer the same, that risk is the main driver of investment performance. This is the purpose of the on-line information pack featured on the CNP Assurances website, to encourage retail customers to discover and adopt France’s new life insurance fund.
Eurocroissance is on its way
On 9 February 2015, the Caisses d’Epargne network launched the first two Eurocroissance funds designed by CNP Assurances, ushering in a new era in life insurance. They offer an attractive potential yield combined with a capital guarantee at the end of a set period. For example, Eurocroissance 100 offers a 100% capital guarantee at the end of a 12-year period, while Croissance 70 offers a partial capital guarantee (70%) at the end of a shorter period (8 years). Offered initially to the Caisses d’Epargne network’s wealth management customers who want to diversify their investments, this type of fund will subsequently be offered with other traditional savings contracts with a unit-linked formula managed by CNP Assurances and distributed by the Caisses d’Epargne.
CNP Assurances intends to continue providing guidance to its partners and helping them plan ahead.
We really are living in a changing world
Martine Vareilles, Head of La Banque Postale Partnership business unit
“With interest rates close to zero, the only way of generating a yield is through portfolio diversification. Eurocroissance offers a capital guarantee at the end of a set period, not before, providing scope to invest in diversified asset classes. This flexibility allows us to take up market opportunities and offer higher yields. The key issue is time. Eurocroissance is an ideal pension product, which is good news because younger generations generally cite retirement income as their main reason for saving. We need to explain, to help customers to plan ahead. It’s a new experience for savers, for our partner’s insurance advisors and for us. We really are living in a changing world.”