RPT-Fitch: Outlook for French life insurance sector remains negative for 2014
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Dec 12 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says its outlook for the French life insurance sector remains negative in 2014 due to the difficult operating environment. The rating outlook for the French life sector is also negative, reflecting the material proportion of company ratings on which the Outlook is Negative.
The French life sector has continued to show some deterioration in 2013 due to the challenging interest rate environment and unfavourable business mix, which will continue to penalise life insurers' profitability and solvency.
Fitch expects net collections (i.e. premiums - claims paid - surrenders) to remain low in 2014 due to lower premiums and still high lapses, which indicates that the market is becoming increasingly mature.
The margins on euro-denominated products are weak, mainly due to the low interest rate environment, which should lead the majority of life insurers to further reduce returns offered to policyholders. The business mix is still unfavourable as the sales of unit-linked policies remains linked to stock market movements.
Capital adequacy is also being affected by volatile financial markets, although 2013 year-end figures should be supported by higher unrealised capital gains on both government and corporate bonds and the resilient valuation of real estate assets. When excluding unrealised capital gains which are inherently volatile, the solvency of most players remains constrained.
The rating outlook could be revised to stable if higher asset returns, especially interest rates, allow insurers to rebuild margins and, as such, possibly improve retained earnings.
As part of its forthcoming series of insurance roadshows, Fitch will be in Paris on 22 January 2014. Marc-Philippe Juilliard, Senior Director in Fitch's insurance team will speak on French life and non-life insurance, and there will be presentations on the year ahead for Fitch's Insurance Group, our rating process and insurance rating methodology as well as on Global Reinsurance hosted by senior members of Fitch's insurance team.
The report "2014 Outlook: French Life Insurance " is available at www.fitchratings.com.
Link to Fitch Ratings' Report: 2014 Outlook: French Life Market
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