Further market consolidation may be on the way
The Swiss life market is one of the largest in Europe – it is also happens to be one of the most concentrated, if not the most. With three world stage operators among the top five players, it is perhaps not too surprising that 84% of the domestic market is in the hands of the big five: Swiss Life (38% market share); Winterthur 20%; Zurich (15%), Basler 6% and Helvetia– Patria (5%).
The Swiss have done the trick of effectively tackling markets abroad, but without conceding much of the their own back yard to outsiders. It may be the strength of its own insurers, which keeps outsiders at bay, or as S&P points out, not being an EU member means it has not had to incorporate the directives emanating from Brussels into domestic legislation. According to S&P, Allianz is the non-domestic insurer that has made most progress there to date, through the range of companies it controls, making it the sixth largest player, with a 4% Swiss market share.
Through the 1990s there has been moves to regroup within the insurance sector, such as the formation of the Helvetia–Patria group, but the big plays came more recently with the rejiggings in the banking sector. Basler, says S&P, is resolutely against merger, though it is happy to develop co-operation agreements with other domestic life groups.
The well established half-and-half market split of new business between single and regular premium policies seems to have come to an abropt end with the introduction of stamp duty from April last year. Since the tax was announced ahead of its imposition, the effect, says S&P, was to boost single premium sales in 1997, at the cost of declines thereafter. Overall, life premiums grew at over 11% in 1997, says S&P.
The upsurge in asset values due to buoyant asset markets has resulted in reasonable earnings. But with reducing investment yields in the future and the contraints of operating in an overcrowded market, S&P sees pressure on earnings and the potential for more consolidation in the life market. Fixed interest accounted in 1997 for over 50% of insurers’ invested assets, a proportion that has increased from 36% in 1994 . While real estate has declined as in importance to around 8% of portfolios, equity has only been gradually increased to 14.6% (9.5% in 1994) of non-linked life assets. Fennell Betson