RPT-Fitch: Dutch insurers face mature market; cost cutting key
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Dec 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says that cost efficiency will be a key driver of Dutch insurers' profitability as they face a mature and highly concentrated market at home with limited opportunities for growth.
In a new report published today, Fitch says the Dutch life insurance market has declined sharply since 2007 as a consequence of tax changes allowing banks to compete on equal terms with insurers in the savings market. The fall in demand for life products, together with low interest rates, have hit profitability. Fitch expects this trend of competitive pressure to continue in 2014, possibly spurring further consolidation as the market shrinks. In response, Dutch insurers should achieve further streamlining and optimisation of cost structures in 2014.
The non-life market has been stable and profitable throughout the crisis, which Fitch expects to continue into the new year. The health insurance market, which is the largest in Europe, is making modest but stable profits, while insurers compete on procurement costs. Barriers to entry are high due to the scale needed to operate. Fitch therefore believes that the competitive landscape will not change significantly in 2014.
The Dutch regulator has introduced Solvency 1.5, a solvency regime which contains interim measures and gives the regulator more authority to limit dividends to the holding company. From a credit perspective, this is a positive development, although it is unlikely to lead to rating upgrades.
Overall Fitch expects the issues faced by the sector in 2013 will continue into next year, without any significant changes. This drives the Stable Sector Outlook for the Dutch insurance sector.
The rating Outlook for the Dutch insurance market remains Negative, reflecting those on rated individual companies. The Negative Outlooks on company ratings are largely driven by the Dutch State's bailout of certain bancassurance groups which have had an adverse knock-on impact on their respective insurance operations.
The report "2014 Outlook: Dutch Insurance" is available at www.fitchratings.com.
Link to Fitch Ratings' Report: 2014 Outlook: Dutch Insurance
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