The impact of the sovereign debt crisis of European countries

The impact of the sovereign debt crisis of European countries

European insurers facing the current crisis. One financial crisis drives out the other. Given the current nature of the so-called European debt financial crisis of 2011/2012, it is too early to know the consequences for European and French insurance companies , especially since no one can predict with certainty whether it will or will not be equivalent to that of 1929 . For now, we'll just assume that some insurance companies are likely to experience difficulty for at least three kinds of reasons.

- On the one hand, due to their exposure to the bonds of several European Union States , such as Greece, Portugal, Italy and Ireland, which may default, i.e. not not repay their own debts. However, some German insurance companies like Allianz were able to anticipate the crisis in the euro zone and reduce their commitments. This was not the strategy of certain French companies, which could have beeninvited by the Government to keep their stocks of sovereign debt.

Exposure of insurance companies to sovereign debt. On Greek debt, CNP Assurances would be exposed to the tune of 1.5 billion, Covea to the tune of 520 million (Source : www.agefi . Fr / : Thomas Carlat : Insurers are bending under the weight of sovereign debts . 8/12 / 2011, citing data from CA Cheuvreux). Macif reported gross exposure of 1.34 billion euros to Portugal, Ireland, Italy, Greece and Spain. End of June 2011, Groupama was exposed to the obliState gations s of the euro area up to 1.5 billion for Italy, and 770 million for Greece, Irl ande and Portugal . The Mutuelle d'Assurances du Corps de Santé Français (MACSF group), for its part, mentioned its exposure to the sovereign debts of the five aforementioned states for around one billion euros in November 2011 (Source : www.argusdel'assurance.com /, 6 / 12.2011). Axa , at the end of September 2011, reported a " limited " exposure to bonds of European states for Italy (6 billion euros), Spain ( 3.7 billion euros), Greece ( 400 million euros), Ireland (400 million euros), and Portugal (700 million euros), the whole being considered marginal compared to all of its assets.     

In general , insurance companies are not worried. First of all, because it is not in their habits. Then, because they believe they can absorb the depreciation of the Greek debt by drawing on their provisions for participation in surpluses, resulting from the profits garnered during previous years, even if it means reducing the return on life insurance contracts served to policyholders. Then, because q u ' they could obtain the approval of the authorities to allocate the depreciation on their capitalization reserves. However, in case of default of the other É European states, " God only knows . "   

- On the other hand, because of the spectacular drop in income from their investments in the stock market . Indeed, European insurers have sizeable stakes in the banking sector, which is itself very affected by this new financial crisis. For example, Groupama holds 4.25% of the capital of Société Générale, and Axa , the leading European insurance group, 5.10 % of that of BNP Paribas . But in 2011, Societe Generale shares lost 57, 22 % of its value and that of BNP Paribas 36.25 %. Meanwhile, in 2011, the Axa share has lost 19.32 % (less 67.96% over the last five years ), and the action CNP Assurance s first has ssureur people in France, 29, 08 % (minus 55.43% over five years ) .

I n November 2011, BNP Paribas, Société Générale and Crédit Agricole were identified by the Financial Stability Board, responsible for coordinating financial regulation at the planetary level, among the 29 so-called systemically important banks, representing a danger to the whole economy in bankruptcy. The rating agencies Standard & Poor's, Moody's and Fith immediately downgraded BNP Paribas and Société Générale. In this context, these two banks were invited by the Prudential Supervisory Authority to increase their own funds in order to comply with the new solvency rules of the European Banking Authority (9% capital ratio, at 30 June 2011). They have announced that they can achieve this without having to resort to public funds, in particular by giving priority to setting aside all of their profits, and therefore not distributing dividends to shareholders, or even disposing of assets.

- Lastly, due to the stagnation or significant decrease in life insurance subscriptions , as well as withdrawals of funds greater than contributions. Individuals, worried about the consequences of the crisis with regard to investments made up of government bonds tend to refer to bank passbooks, low remunerated and without risk or constraint (more than 24 million French people have insurance). life).Thus, during the first ten of the year 2011, the collection of life insurance fell by 12% compared to the same period of the previous year. Even more , in September, October and November 2011, withdrawals from funds exceeded contributions (negative balance of 6.4 billion euros over this period). Such a phenomenon had only occurred three times since 1977, notably in 2008, following the bankruptcy of Lehman Brothers. The decrease in life insurance subscriptions and the repurchases of life insurance contracts exceeding the inflow should logically lead to a stagnation or even a drop in the net profit of insurance companies and mutuals in 2011/2012, and this despite good results from damage insurance. It should be noted, moreover, that insurance companies will have to bear in 2012 and 2013 the increase of 5% of the corporation tax of companies whose turnover exceeds 250 million euros, until the return below 3% public deficit planned by the 4 ^th amending Finance Act for 2011 , No. 2011-1978 of 28 December2011 .

Groupama. In December 2011, the Standard & Poor's rating agency placed several large European insurance companies under negative watch (Allianz, Aviva, Axa, Caisse Centrale de Réassurance, CNP Assurance , Gene rali, etc.). The same fate was reserved for Groupama, the fifth largest French insurance group, whose solvency margin fell below 100% regulatory, with significant exposure to euro area government bonds (1.5 billion for Italy, 770 million for Greece, Ireland and Portugal, at the end of June). Standard & Poor's even planned to switch Groupama from the Investment category to the so-called Speculative ( Junk bond ). Immediately, the mutualist group announced the postponement of its stock market listing to 2015 and implemented a recapitalization plan, in part thanks to asset disposals, such as its stake in the capital of the real estate group Silic which should be taken over by the Caisse des Dépôts et Consignation. In addition, several European insurers, including the German Allianz and the French Axa and Covea (GMF, MAAF, MMA) have shown an interest in the takeover of Gan Assurances, a subsidiary of Groupama, in case the latter considers to separate them to strengthen their own funds.