The major life insurers are in strong positions, with good or improving capital base and strong earnings, reports S&P in its analysis of the Dutch market. A number of things have been going the insurers’ way in recent years. In particular, the rolling back of state provision for retirement and the increasing awareness of this within the Netherlands, together with rising disposable income has resulted in buoyant demand for the industry’s products. The strong tradition of funding for pensions probably only serves to make the Dutch keener than many others to make extra provision for old age. Group insurance pension provision is salary related and so this segment has seen growth based on the positive development in incomes.
Through the 1990s, the insurance industry has been consolidating, particularly with the demolition of any barriers to insurer and bank ownership, with some very dominant players bestriding the financial landscape. Nationale Nederlanden’s life operations account for some 22% of life premiums, with other notable players Aegon (10%) and Interpolis (7%). Altogether, as S&P notes, the top five handle 50% of the country’s life premiums, while on 1997 figures the top 10 groups corralled a combined market share of 65%. Since then we have seen Achmea assemble itself, particularly with the acquisition of pensions investment and administration group, PVF. The emergence of Fortis from the base of Amev into a significant bancassurance force had its culmination most recently in the aquisition of Générale de Banque in Belgium.
A feature of the market has been the emergence of unit-linked life as the main driver, accounting for 35% of premium income, and having doubled between 1995 and 1997, as S&P points out. Unit-linked group premium volumes are nearly half of the group market.
Robust life premium growth of double digit figures has not put a financial strain on most insurers in the Netherlands; in fact, capitalisation has been improving for many insurers, according to S&P. The rise in asset values not only helps the sale of unit-linked products, it also boosts insurers’ assets and earnings. When the larger size of the players is taken into account, increasing economies of scale and delivering lower costs and improved efficiency, earnings have benefited. S&P has given the seven rated Dutch insurers a fine bill of financial health, with four rated strong and three ‘very strong’. Aegon gets the triple-A – the highest rating.
For non-linked life assets, the move to invest more in equities has been definite but coming from a low base. In 1995, 13.65% of assets were in shares and mutual funds, but by end-1997 this had risen to 20.5%; real estate continued its downward drift over this three-year period from 7.4% to 6.8% in 1997. Fixed interest has moved up smartly, from 19.6% to 25.5%; mortgages and other loans took a beating over this period.
Looking ahead, S&P sees challenges from intensifying competition and the spectre of reduced investment yields, but reckons the Dutch industry is nicely positioned to take on these challenges and seize the un-doubted new business opportunities arising as the state withdraws more from benefits.