Tuesday, December 6, 2022
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Livret A vs life insurance: benefit on the rate

Life insurance suffered a sharp setback in August after more than two years of positive momentum. For the first time since the start of the 2020 school year, the placement registered a negative approach. This poor performance is related to the renewed popularity of Livret A, whose returns follow the increase in interest rates and the rate of inflation.

At the start of the year, Livret A was still well behind funds in euros and unit-linked life contracts in terms of collection. Its yield was still unattractive with interest remaining below 1% until February. The doubling of his remuneration on August 1 changes the situation.

This tax-free savings then gives a higher return than most euro funds. Investors benefited from this turnaround, according to statistics on the two investments in August. In addition to the renewed form of Livret A, the breathlessness of multi-support contracts is felt.

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Cautious savers and uncertain insurers

The net outflow recorded by the offer life insurance in August is not really a surprise. Several analysts predicted this eventuality from the first months of 2022, when interest rates began to rise at a steady pace. The insurance companies themselves expected a narrowing of the distance between the life contract and Livret A.

Thus, the CEO of France Assureurs shows no signs of concern when he reveals the poor figures for Euro funds in August. For Franck Le Vallois, the slowdown in this asset-based investment is logical given deterioration of the current economic and geopolitical context. According to him, all market signals make savers wait and exercise caution in their placement.

The director of the FA even clarifies that the drop in form in August is “normal”, as the summer period is traditionally not very lively for life insurance. Franck Le Vallois recognizes after all the existence of a draft created by the doubling of the Livret A rate. This interest rate revision was a blow to insurance companies, which cannot quickly raise the remuneration of funds in euros due to their inertia.

A decrease of 1.5 billion euros in one month

The reassuring comments of the president of France Assureurs do not mask first sign that life insurance has run out of steam in recent months. Admittedly, this investment continues to show a positive balance in the first half of the year, with a net inflow of 12 billion euros in the first seven months of the year. These overall statistics do not reflect the slowdown in fundraising since June.

The 600 million and 800 million harvested in June and July are clearly below product standards. The real turning point is reached in August: life insurance shows a net loss of 700 million euros, a decrease of 1.5 billion euros in one month. We have to go back to September 2020 to find the last negative collection at this location. Unsurprisingly, euro-denominated funds bear the brunt of the responsibility for this poor performance. Unit-linked entities, on the other hand, continued to be attractive and had a positive balance of 1.1 billion euros. Unit-linked units absorbed 40% of payouts in August.

In fact, life insurance has many advantages over the fund in euros, including a large number of vehicles available, the absence of a ceiling and a large asset in terms of the transfer of assets.

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