Statistical News Release: Stock market correction at end of 2018 had little influence on Dutch insurers’ investments

Statistical news
Datum 13 maart 2019

Dutch insurers’ total assets fell by 1% in the fourth quarter of 2018, compared to the previous quarter. The effect of the stock market correction in December 2018 on insurers’ assets was therefore limited, as shown by an analysis of investments by category on a quarterly basis. An important reason for the limited pass-through effect of lower equity prices is the relatively low significance of equities in the total investment portfolio of insurers.

The equity portfolio of insurers fell by 5.9% in the fourth quarter of 2018

Figure 1 shows the development of the equity and investment fund portfolio of insurers on a quarterly basis since the first quarter of 2018.

Figure 1 shows that the equity portfolio of insurers fell in value by 5.9% in the fourth quarter of 2018. This fall is the result of differences in both price and volume as at 31 December 2018 compared to 30 September 2018. It could be the case that equities that suffered heavy losses were sold by the end of the quarter, and on the other hand, following the stock market correction, new equities were purchased for a more favourable price. For the purposes of comparison, as a result of the market correction, in the fourth quarter of 2018, the AEX fell by 12.2%. Dutch equity funds also lost around 12% of their value in this period.

In addition to the equity portfolio of insurers, the investment funds portfolio also fell in value by 4.3% in the fourth quarter. These investment funds also invest part of the assets they manage for insurers in equities. Here it is also the case that the total change is the net effect of volume and price adjustments throughout the fourth quarter.

Impact of stock market correction remains limited at the end of 2018

In the fourth quarter of 2018 the total assets of Dutch insurers fell from EUR 480 billion (Q3 2018) to EUR 475 billion. The limited impact of the stock market correction on the assets of insurers is in contrast to the impact of the stock market correction on investment funds and pension funds which DNB reported on earlier.

The limited pass-through effect of the drop in equity prices is consistent with the relatively low significance of equities in the total investment portfolio of insurers. Figure 2 provides a breakdown of invested assets by investment type, presented separately for the life insurance and the non-life insurance sectors (including health care).

Figure 2 shows that life insurance companies invest relatively more in mortgages, loans, investment funds and government bonds while non-life insurers prefer to invest in corporate bonds, equities and cash. These differences can be explained by the different terms to maturity of the liabilities. A life insurance company generally has long-term liabilities and therefore makes investments on the basis of a long-term vision, while for a non-life insurer the withdrawability of funds is relatively more important. The significance of equities in invested assets is of equal importance for all insurers, at 4.7%. Non-life insurers only hold a small share of the total assets in the sector (approximately 11%, amounting to EUR 50 billion at 31 December 2018).

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