The world is changing, and so is the CNP insurance group. Long perceived as the life insurer of the French in the shadow of the postal networks or the savings banks, the group, now a 100% subsidiary of La Banque Postale after its delisting last June, has ambitions to growth in Europe and Latin America, and is even preparing its diversification into property and casualty insurance, with the forthcoming integration, in 2023, of La Poste’s P&C activities. “It’s a change of dimension for us”welcomes Stéphane Dedeyan, CEO of CNP.
On the sidelines of the presentation of the half-year results, the group also announced the reorganization of its activities in Italy, which has become its second international market, ahead of Brazil. It has thus just acquired the 49% stake held by its strategic partner in Italy UniCredit in CNP Vita Assicura, for 500 million euros, and the sale of 6.5% of the capital of CNP UNiCredit Vita to the Italian bank.
A double operation which reflects, according to the managing director, “the singularity of our model” which rests on ” two legs “, namely strategic agreements with major banking players on the one hand and multi-partner distribution agreements on the other. In Italy, 40% of half-year turnover (4.7 billion euros) is achieved via UniCredit and 60% with other partners.
“Our strategy is a development strategy, we are conquering”, emphasizes Stéphane Dedeyan, who adds that “other external growth operations are in the pipeline” in Europe or Latin America. In fact, international business is starting to become CNP’s hallmark and now accounts for nearly half of its turnover, which represents a total of nearly 20 billion euros in the first half, up 22% thanks to Italian purchases.
In France, business was less dynamic in life insurance and pensions in the first half, with premium income down 2.6% to 10.3 billion euros, with outflows of more than a billion, the increase in Units of Account (UA) failing to compensate for the fall in the fund in euros (-3 billion euros). UC accounted for nearly 32% of inflows in the first half, an average lower than the sector average (39%), but CNP is rapidly making up for the delay in previous years on the UC front.
The interest rate shock
If the rise in rates, which has an immediate positive effect on the coverage rate of the minimum required capital (249%) according to the prudential rules of Solvency 2, the manager recognizes that an excessive rise in rates constitutes a risk, “a risk for which CNP is undoubtedly the most prepared”. Reduction in asset maturity, portfolio hedging policy, but above all a provision for profit-sharing (PPB) of 15.4 billion euros, i.e. 7% of mathematical provisions, an above-average amount of the sector.
It is this provision constituted over the years that should make it possible to “join” the latent capital losses and the renewal of the portfolio (the actuarial rate on purchase has risen to nearly 2% against 1.17 % in the first half of 2021), while ensuring a decent return for policyholders.
Indeed, the worst nightmare of a life insurer is to be confronted at the same time with a rise in the rates and with massive repurchases (which oblige to externalize the capital losses). And to avoid an excessive acceleration of outflows from the euro fund, it will be necessary to serve a rate not too far from that of the Livret A (2% on August 1 and probably 2.5% to 3% in February 2023) , even if life insurance and savings accounts are very different in nature.
Cap on Euro growth
On the other hand, there is no question of considering the launch of new funds in euros, which would “penalize” the policyholders of current euro funds. The balance of the fund in euros is based on pooling between the oldest and most recent policyholders. Unit-linked units are also a defense because they can better adjust to rising interest rates, in particular via structured products.
On the other hand, CNP intends to put the turbo, at the start of the school year, on the euro growth fund, the terms of which had been revised by the Pact law, the rise in rates making the bond cushion more effective. CNP is also putting the accelerator on life insurance targeted at a more upscale clientele, with inflows of 1.7 billion euros and a unit-linking rate of over 50%.
In a particularly uncertain context, the insurance group highlights the strength of its balance sheet of 400 billion euros and its high solvency ratio to ward off shocks. With a key idea: pooling as a remedy in the face of emerging risks. “The challenge today is no longer segmentation and selection but to have the greatest pooling possible. This is a real paradigm shift on the liability side for insurers”believes Stéphane Dedeyan.