Livret A compulsory life insurance forced the first rate hike in 30 years
Posted January 26, 2023, 7:00 am
The return of inflation and the sudden increase in interest rates by the European Central Bank (ECB) create an unprecedented situation for depositors. In fact, for the first time in thirty-two years, insurers are in the process of raising the rate of return on their funds in euros, the main product of French life insurance.
According to the first figures released by the companies, the average of the tariffs served for 2022 varies between 1.80% and 2%. A year ago, the euro fund was returning an average of just 1.30%. You have to go back more than thirty years to see growth. Average wages then fell from 7.6% to 8.9% between 1989 and 1990.
Booklet A ahead, as in 1982
The trigger for this turnaround? Livret A. Competition For the first time since 1982, life insurance has yielded less than the regulated book, the emblem of popular savings. “This explains the significant increase in rates served by funds in the euro,” said Mathieu Sebastien, partner at Oliver Wyman.
1er Last August, the Livet A rate doubled to 2% thanks to a calculation formula indexed to inflation and interbank rates. And 1er It will even rise to 3% in February. Incredible rate for risk-free savings.
Officially, the two products are not competitors, and the large holders of life insurance have already reached the payment ceiling in the regulated booklets. “These are not the same products in terms of investment horizon and invested amounts. Livret A is above all a barometer for short-term savings,” says Philippe Perret, CEO of Société Générale Assurances.
However, the companies have a fever. “Insurers want to prevent outflows in the coming months,” says Mathieu Sebastien. Slowing payments or even net payments will delay reinvestment in higher paying securities and therefore higher future returns and may force them to sell depreciating assets.
Insurers used two levers to increase revenue. “First, they were able to increase the average return on their portfolios by selling assets with unrealized returns, such as real estate or stocks, and began reinvesting in higher-yielding bonds. Second, they were able to tap into their euro fund reserves,” explains Oliver Wyman’s adviser.
The contracts do have a war chest, a profit sharing provision (PPB), which is 5% of the 1.800 billion in outstanding life insurance. “After at least 15 years of continuous staffing, companies return a portion of PPB. This would allow 2022 rates to increase by an average of 0.20 to 0.30 percentage points, notes Cyrille Chartier-Kastler, founder of the firm Facts & Figures. To this is added about 0.40 points due to non-donation of PPB this year.
Pressure on bank insurers
At Societe Generale, for example, “80 basis points [0,8 %, NDLR] Philippe Perret explains that the savings we made last year were devoted to increasing the rates shown to customers this time. Knowing that we stabilize the return on our assets thanks to a significant portion of our investments (including bonds), performance is positively correlated with rising rates. »
Société Générale Assurances’ prime rate rose to 1.60% from 0.75%. Crédit Agricole saw the biggest rise in Good Value for Money, up 1.25 basis points from 0.65% to 1.90% for its flagship fund.
“This year, bancassurers have announced spectacular rate hikes to return to the market average. After several years of trade policy with the fund in the euro, they are afraid to suddenly go abroad, knowing that they have a very significant debt on these supports, “explains Cyrille Chartier-Kastler.
The situation remains fragile, facing a possible further increase in Livret A, term accounts and unregulated savings accounts (PSA Banque, Boursorama, etc.). Mathieu Sébastien asks: “It remains to be seen whether the big traditional banks will follow the move. The latter will have to arbitrage between collecting deposits from their retail bank and protecting their insurance subsidiaries.