Analysts at Fitch Ratings have estimated that the operating profits of French insurers increased by around 3% in 2022, despite broadly flat premium income, although the life and non-life segments showed diverging trends in their results.
Fitch observed strong growth in life operating earnings that reflects higher technical margins, due to higher rates supporting the release of provisions.
Net outflows on traditional savings products accelerated in 2022, it notes, but the effect on financial performance was contained, as earnings are based on a resilient stock of contracts.
Additionally, higher reinvestment yields significantly improved new business margins, but yields on the inforce portfolio were mostly unchanged due to the dilutive – but diminishing – effect of fonds euros net outflows in 2022.
In contrast, the P&C combined ratio deteriorated for most French insurers, primarily driven by claims inflation exceeding price increases and higher natural events, although this was partly offset by favourable prior-year reserve developments.
Fitch further notes that effective reinsurance protection shielded insurers from larger weather-related losses, and that reserving levels were often increased to account for higher inflation.
Technical profitability also improved in health, and even more so in protection, both driven by improved loss experience, the positive effect of price increases, and favourable changes in actuarial assumptions, while higher investment income was generally supportive of non-life operating earnings.
Looking ahead, Fitch expects that French insurers’ ability to raise rates to achieve above-inflation premium increases in retail will be challenged by the competitive nature of the market and societal pressure.
It also suggests that higher retentions as a result of limited reinsurance capacity and higher pricing could make P&C earnings more volatile.
