French insurers' operating profits increased by close to 3% in 2022, despite broadly flat premium income, according to a new report by Fitch Ratings.
The ‘French Insurance Dashboard: 2022 Results' revealed that better earnings in life, driven by higher yields, more than offset the lower non-life earnings that were due to inflation and natural catastrophes.
The French insurance sector is well positioned to withstand market shocks and margin pressures in 2023 due to sound capitalisation and diversified business profiles, Fitch said.
Key risks for the sector include persistent claims inflation and higher reinsurance cost in non-life - as well as lapse risk in life.
The report said the "diverging dynamics between the life and non-life segments… highlight the benefits of the sector's diversified business model".
It continued: "Strong growth in life operating earnings reflects higher technical margins, due to higher rates supporting the release of provisions. Net outflows on traditional savings products (fonds euros) accelerated in 2022, but the effect on financial performance was contained, as earnings are based on a resilient stock of contracts.
"Fonds euros were a drag on life premiums, while unit-linked (UL) sales proved more resilient, representing a stable 40% of premiums."
"Higher reinvestment yields significantly improved new business margins. However, yields on the inforce portfolio were mostly unchanged due to the dilutive - but diminishing - effect of fonds euros net outflows in 2022. UL fees proved resilient, as increased volumes broadly offset negative market effects."
