Signalling a gloomy outlook for the
Netherlands’ life insurance market, the country’s largest composite
insurer Achmea has announced that it is to fully impair goodwill
related to its life insurance and pension activities. The total
amount involved is €279m ($365m) and relates to goodwill that arose
from the merger of Achmea and Dutch bank Rabobank’s life insurance
subsidiary Interpolis in 2005.
At the time of the merger, Achmea was a unit
of Dutch insurer Eureko which changed its name to Achmea in
November 2011. Achmea’s two largest shareholders are Vereniging
(association) Achmea and Rabobank which hold stakes of 63.3% and
31.3%, respectively.
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Both are mutual organisations. Providing the
rationale for the goodwill impairment, Achmea said in a statement
that the Dutch life insurance market has been shrinking for the
past five years and that it views the decline as structural. Achmea
specified three reasons for this view: one being the growing
customer demand in the Netherlands for bank savings products that
offer the same tax advantages that once applied exclusively to life
insurance products.
Another factor detracting from the life
industry’s prospects is the decline in demand for unit-linked
products. According to the Dutch insurance industry association the
Verbond van Verzekeraars (VVV), sales of unit-linked products
slumped from a peak of about €800m in 2007 to about €100m in
2011.
Providing a third reason for its gloomy
outlook for the Dutch life market, Achmea pointed to a slump in the
housing market which has resulted in a decline in demand for
mortgage-related life insurance products.
Achmea said that as a result of the goodwill
impairment, it will report a loss in its year to December 2011.
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By GlobalDataExcluding the impairment, its net profit is
expected to be between €40m and €80m, a particularly low estimate
given that its gross premium income will be of the order of €22bn.
In the first half of 2011,
Achmea reported gross premium income of
€10.96bn, of which €6.56bn was from health insurance, €2.04bn from
life insurance and €2.36bn from general insurance.
Commenting on Achmea’s decision to impair its
goodwill, Nadine Abaza, an associate analyst at Moody’s Investor
Services, said it is credit-negative for Achmea and Dutch life
insurers in general. Moody’s, he noted, believes Dutch life
insurers will continue to struggle to adjust to volatile financial
markets and a life insurance market that is structurally changing
and shrinking.
Reinforcing Achmea’s comment on competition
from banks, Abaza said: “Banks’ savings products are taking over
the landscape at a rapid pace, representing around 50% of new sales
of tax-relieved savings products – pensions and mortgage-related –
in 2010 compared to around 10% in 2008.”
He added that these products have
traditionally represented a high portion of life insurance
sales.
Abaza continued: “In such a competitive
industry, insurers prioritise retaining business, but that can only
be done at the detriment of growth in profitability.”
He noted that although the Dutch life
industry’s new business margins of about 11% are the lowest in
Europe, its minimum guarantees are among the highest. The VVV
reported that there were 62 life companies operating in the
Netherlands at the end of 2009.
Moody’s is not alone in its negative outlook
for the Dutch life industry. In early-2011 the Netherlands’ central
bank De Nederlandsche Bank warned that the problems facing the life
industry were so serious that the survival of many market players
is at risk.
