Basic Market Overview - Insurance in France by Sutherland Global Services

Basic Market Overview - Insurance in France December 2012

Disclaimer This document is the proprietary and exclusive property of Sutherland Global Services except as otherwise indicated. No part of this document, in whole or in part, may be reproduced, stored, transmitted, or used for design purposes without the prior written permission of Sutherland Global Services. The information contained in this document is subject to change without notice. The information in this document is for information purposes only. Sutherland Global Services® disclaims all warranties, express or limited, including, but not limited, to the implied warranties of merchantability and fitness for a particular purpose, except as provided for in a separate software license agreement. All confidential or proprietary information contained in Sutherland’s response shall at all times be and remain the sole and exclusive property of Sutherland Global Services, Inc.

©©2012 GlobalServices Services Inc., rights reserved. Privileged and confidential information of Sutherland Global 2010Sutherland Sutherland Global Inc., All All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. Services Inc.

www.sutherlandglobal.com

Disclaimer

THE SAMPLE CONTAINS EXCERPTS FROM A STUDY CONDUCTED BY SUTHERLAND GLOBAL SERVICES FOR ITS CLIENT. THE SAMPLE MAY NOT CONTAIN ALL THE PAGES OF THE ORIGINAL DOCUMENT THIS SAMPLE HAS BEEN PREPARED BY SUTHERLAND GLOBAL SERVICES INC. OR ITS ASSOCIATES OR AFFILIATES (“SUTHERLAND GLOBAL SERVICES”) EXCLUSIVELY AS AN ILLUSTRATIVE SAMPLE ONLY AND IS SENT TO AUTHORISED RECIPIENTS SOLELY FOR THE PURPOSE OF EVALUATING SUTHERLAND GLOBAL SERVICES’S SUPPORT SERVICE CAPABILITIES. THIS SAMPLE SHOULD NOT BE CONSIDERED AS AN OFFER TO SELL, A SOLICITATION TO BUY, OR AN ENDORSEMENT OR RECOMMENDATION OF ANY COMPANY. SUTHERLAND GLOBAL SERVICES DOES NOT GUARANTY THE ACCURACY, COMPLETENESS OR OTHER CHARACTERISTICS OF THE DATA / INFORMATION OF THE REPORT.

This Sample may not be reproduced or distributed (in whole or in part) to any third party without the express prior permission of Sutherland Global Services. Sutherland Global Services may also have (or have had) arrangements with entities whereby Sutherland Global Services receives or is in receipt of information relating to the subject matter of this Sample that is confidential or proprietary to a third party, and thus may not be utilized. Accordingly, Sutherland Global Services may be in receipt of relevant information that is not reflected in this Sample.

www.sutherlandglobal.com January 29, 2013

Basic Market Overview - Insurance in France Client • The client is a leading provider of Insurance based out of the U.S. with a need for brief market assessment of the France Insurance industry focusing on Non-life insurance segments to help formulate geographic diversification strategy

Project Scope • Key objectives of the study were to size the France insurance industry, understand break-up by segment, analyze key trends and challenges of the industry, understand key macroeconomic indicators for the insurance industry, identify top players in the insurance industry in France, and compare them on the basis of financial performance

Sutherland’s Solution • SGS conducted detailed secondary research to size the insurance industry in France  Penetration, premiums by insurance-type, and growth trends over the past few years • Leading players in Non-life insurance segments were also identified and ranked, based on key financial parameters • SGS also analyzed the key trends and major challenges of the industry • All databases to which SGS holds subscription, were extensively used to collate the requisite information

• Benefits to the Client • The project provided significant intelligence to the client with regards to the insurance industry in France, which proved instrumental in developing a detailed course of action for geographic diversification/expansion o Identification of key challenges and trends helped client assess its strategy and take corrective course of action where required

www.sutherlandglobal.com January 29, 2013

Break-up of insurance premium by country

80% of the total European market

Break-up of insurance premium by Insurance Segment, 2011 Total = â&#x201A;Ź billion

27.6%

France

29.7%

Germany

31.8%

Italy

30.9%

Netherlands

20.8%

% of European Market (%)

206.0

18.9

190.0

17.4

178.1

16.2

110.2

10.1

80.2

7.4

Spain

39.3%

60.6

5.5

Switzerland

28.6%

45.3

4.2

29.7

2.7

29.2

2.7

23.3

2.1

18.1

1.7

16.5

1.5

15.1

1.4

13.9

1.3

11.7

1.1

1,089.0

100%

Sweden

19.7%

Belgium

31.7%

Denmark

31.0%

Finland

19.1%

Austria

47.2%

Norway

37.7%

Poland

43.7%

Portugal

30.4%

Europe

58.6% 0%

10%

Life

20%

30%

31.2% 40%

50%

60%

Property, casualty and accident

70%

10.2% 80%

90%

100%

Health

Source: Insurance Europe

www.sutherlandglobal.com January 29, 2013

The French insurance market has experienced significant volatility during the past few years, … Insurance Penetration in France, 2007-11 (%) 10.36%

10.57% 9.48%

10.69% 9.52%

Insurance Premium Written in France, 2007-11 ( € bn) 195.6 43.6

8.05% 2.31%

2007

7.17% 2.31%

2008 Total

8.19% 2.38%

2009 Life & Health

8.32%

2.37%

2010

183.1

44.7

199.7

206.4

45.0

45.8

154.7

160.6

142.1

2010 Non-life

2011

190.0 47.9

7.12%

2.40%

2011 Non-Life

152.0

138.4

2007

2008 2009 Life & Health

_________________________________________________________________________ France’s Non-life sector resilient despite economic difficulties • The French insurance market has experienced significant volatility during the past few years, although the non-life sector continues to grow – While the life market contracted in 2011, gross premium written (GPW) for non- life insurers continued to increase. The non-life sector benefited from a harder market, with rates for motor lines in particular lifted to improve profitability – A benign year for natural catastrophes in 2011, compared with 2010, also supported the non-life market. The sector posted improved profitability levels in 2011 and is maintaining a solvency margin well above the regulatory required amount • GPW for the non-life segment increased 4.6% to an estimated €47.9 billion in 2011. This is a record level for the non-life market, with rate increases mainly accounting for the increased premiums+ • The sector has shown good underwriting discipline in what has been a challenging investment environment, which is unlikely to improve in the foreseeable future – Any deterioration in Euro zone macroeconomic fundamentals is likely to have a negative effect on the market’s overall capitalization. However, as in other European countries, the slowdown may result in an overall reduction in claims as a result of reduced economic activity Source: Fédération Française des Sociétés d’ Assurance , A.M. Best research , News articles

www.sutherlandglobal.com January 29, 2013

… although the non-life sector continues to grow France Non-Life insurance by Segment, 2011 (€ bn)

France Non-Life Combined Ratio, 2009-11 (%)

100% = €47.9 bn 100.9%

98.4%

94.5%

2009

2010

2011

Other 18.0%

Motor

Construction 39.7%

5.0% Liability

7.3% 12.5%

Commercial

17.5% Property

_________________________________________________________________________ Key Observations • Almost every line of business (with the exception of commercial property which remained stagnant) contributed to non-life growth. Motor, the largest line of business at 40% of non-life GPW experienced a near 4% increase in premium to €19 billion – The second-largest class of business, household property, enjoyed a 6.3% uplift in GWP to €8.4 billion – The increases in non-life GPW are, in part, a result of higher rates. Insurers are exercising greater underwriting discipline, as the continued uncertainty in the Euro zone has resulted in historically low government bond yields • The French non-life insurance sector has improved its underwriting profitability in the past two years – However, natural catastrophes remain among the most significant threats to this trend. Notable events have included severe flooding in Var in the summer of 2010. In December 2011, windstorm Joachim struck the north of France and was followed by windstorm Andrea, which caused damage in various areas of the country in January 2012 • A combination of rate increases in 2011 and a more benign claims environment has driven the large improvement in technical profitability and rate increases is expected to continue in 2012 and 2013, albeit at lower levels than those achieved in 2010 and 2011 Source: Fédération Française des Sociétés d’ Assurance , A.M. Best research, News articles

www.sutherlandglobal.com January 29, 2013

Other Key Observations about France Non-Life insurance Strong Competition • Competition in the non-life insurance market is gaining ground from low-cost products offered via the internet by large groups such as Groupama (Amaguiz), AXA (Direct Assurance) and MACIF (idmacif) or by internet brokers – The success of such offers is supported by the difficult economic environment and the shift of some policyholders towards less expensive and simpler non-life insurance products due to a decline in their purchasing power – The current environment of increased tariffs and the development of online comparative insurance operators (known as ‘aggregators’, which have been very successful in other countries, such as the UK) have increased the attractiveness of lowcost offers Change in Regulation

• The French government intends to pass legislation to reform the natural catastrophe insurance system, known as Régime Cat Nat (Nat Cat scheme). The reform will not bring any changes to the current articulation of the scheme, in which the French national reinsurer, Caisse Centmle de Reassurance (CCR), plays a major role, but it should ensure coverage is based on an exhaustive list of named perils. Growing Role of Bancassurance • The bancassurance channel has continued to play a growing role in the non-life sector, mostly on personal lines. This trend will intensify in 2013 with the development of La Banque Postale’s non-life insurance offer – La Banque Postale is well positioned to rapidly capture market share in this segment due to its access to an extensive network of 17,000 post offices and outlets, the largest in France – Its entry into the non-life insurance market should intensify an existing trend for general agents to increase the size of their distribution networks and capitalise on their expertise in order to remain competitive

Source: News articles

www.sutherlandglobal.com January 29, 2013

France’s largest Non-life Group in 2011 France’s largest Non-life Group in 2011

Group

Non-life premiums (€ bn)

Market share (%)

Combined Ratio 2010 (%)

Comments

Combined Ratio 2011 (%)

Covéa (MAAF, MMA, GMF)

9.2

14.0

102.40

Groupama

8.6

13.1

103.20

96.50

Sferen (MACIF, MAIF, MATMUT)

7.6

11.6

103.5

AXA France

6.7

10.2

98.10

101.50

Generali France

4.7

7.2

101.30

98.70

Allianz France

3.3

5.0

102.70

97.90

Crédit Agricole Assurances

2.6

4.0

131.7

96.9

Groupe des Assurances du Crédit Mutuel

2.2

3.4

CNP

1.9

2.9

132.6

116.1

Aviva France*

1.2

1.8

109.8%

124.0%

• The non-life insurance market did not experience major changes in the number of companies in 2011 – Concentration remained high, with the 10 largest non-life insurance groups representing 73% of premiums collected, although this is lower than in life • A number of French insurers are attempting to grow outside of France, seeking risk diversification and faster growth through M&As – Covéa acquired UK insurer Provident Insurance in June 2011. In April 2011, the French SGAM purchased an 81% stake in Banca Popolare di Milano ‘s life operation, which controls BPM’s P/C business, BPM Assicurazioni • French insurers also see opportunities in emerging markets in Africa, given its relative proximity and common language – French insurers such as AXA, as part of a wider emerging markets strategy, are focusing on western African countries including Ghana, the Ivory Coast and Senegal, although they face competition from Moroccan insurers • The breakdown of total premiums by distribution channel remained more or less unchanged compared with previous years, as tied agents and direct mutual insurance companies continued to dominate the market, with shares in GWP written of 34% and 33%, respectively – Other major distribution channels include insurance brokers that focus on commercial lines (18% of GWP written), bancassurance (11%) and, to a lesser extent, direct insurance (2%)

*Combined Ratios given for the general insurance business of Aviva Plc Source: Fédération Française des Sociétés d’ Assurance , A.M. Best research, Company reports, News articles

www.sutherlandglobal.com January 29, 2013

Thank You