Introduction
The SFCRs at yearend 2020 represent the fifth set of annual SFCRs published by European insurers.
We developed an interactive dashboard to efficiently compare the values reported in the insurers’ disclosed QRTs.
In this briefing note, we analyse the SFCRs of several life entities of Dutch insurers, as listed in the table in Figure 1.
Figure 1: Life insurers included in the sample
The insurers included in the sample have been selected based on the total assets in 2020. A selection based on written premiums or own funds could produce a different list of insurers. The total assets included in this analysis sums to about €460 billion, representing about 96% of the total assets of life insurers based in the Netherlands during 2020.
Note that Nationale-Nederlanden (NN) figures are delivered separately from Delta Lloyd until and including 2018.
Analysis of premiums
Figure 2 shows an analysis of net earned premium from 2016 to 2020. Over the last years, the net earned premiums for a.s.r. have increased as a result of several acquisitions. For NN, a sharp increase from 2018 to 2019 is observed followed by a sharp decrease in 2020 as a consequence of, respectively, acquisitions and reinsurance. Overall, net earned premiums in the life market have decreased over the last years.
Figure 2: Net earned premiums per life insurer over time
Net earned premiums of the selected life insurers can be split by lines of business. Figure 3 shows that during 2020 about 42% of net earned premiums are attributed to index/unit-linked insurance contracts, about 21% to with-profits contracts and about 37% consist of other life insurance contracts.
Figure 3: Split of 2020 premium by line of business in the sample
Analysis of costs
We also analysed the development of costs of the selected life insurers. It can be observed that life insurers' cost ratios (total costs / gross written premiums) range widely. In 2020 the range varied from 8% to 24%. Figure 4 presents the evolution of the ratio over the years.
Figure 4: Cost ratios per selected Dutch life insurer
Analysis of balance sheet
In the aggregated balance sheet of the selected insurers, about 58% of assets are comprised of investments. The other main components of the assets are index/unit-linked assets and loans and mortgages. On the other side, liabilities mainly consist of technical provisions for life insurance (88%). As the selected insurers represent around 96% of the total market assets this distribution is in line with the complete market. Figure 5 shows the balance sheet breakdown by assets and liabilities.
Figure 5: Balance sheet as at 31 December 2020 in the sample
Analysis of investments
The asset side of the balance sheets for the Dutch life insurance entities are primarily composed of investments (around 58%).
Figure 6 shows that the investment portfolio of the selected insurance entities consists mainly of government and corporate bonds (about 59%). Derivatives also make up an important part of the portfolio (17.7%). This asset class has been used more and more in recent years for hedging purposes and efficient portfolio management.
Figure 6: Investments mix as at 31 December 2020 in the sample
Solvency Capital Requirement
The aggregated split of the Solvency Capital Requirement (SCR) by risk module at yearend 2020 for the companies in our sample is dominated by life underwriting risk closely followed by market risk. Furthermore, it is significantly offset by the diversification effects and further by the loss-absorbing capacity of deferred taxes (LACDT) and the lost-absorbing capacity of technical provisions (LACTP). The detailed breakdown is presented in Figure 7.
Figure 7: Breakdown of SCR in the sample
Volatility Adjustment impact on insurers
The Volatility Adjustment (VA) has been a popular long-term guarantee measure among life insurers in the Netherlands. To show its effect, the graph in Figure 8 displays the SCR ratio of aggregated selected insurers with and without the VA.
Figure 8: Breakdown of SCR ratio in the aggregated sample over the years
The impact of the VA per insurer in 2020 is then shown in Figure 9. It can be observed that the impacts of the VA is larger for NN, Achmea and AEGON, the entities with (partial) internal models, than it is for ABN, a.s.r. and Athora.3
Figure 9: Breakdown of individual SCR ratios in 2020
Analysis of solvency ratio
The SCR ratio for the aggregated companies included in our sample was 188% at year-end 2020. This shows that life insurers based in the Netherlands continue to hold a significant capital buffer in excess of the required solvency coverage ratio of 100%. Overall, it is noticeable that the SCR ratio for most of the life insurance entities has gone up since 2016, but the average SCR ratio of 2020 has decreased by 22% with respect to its peak in 2018.
Figure 10: SCR ratio in the sample
What’s next?
For more insights in the SFCR figures visit https://apps.nl.milliman.com/sfcr_life_nl.
If you have any questions or comments on the information above or want to discuss further capital management solutions for life insurers, please contact your usual Milliman consultant.
1 This analysis is based on direct writers only. Reinsurers were excluded from the analysis. Companies were selected based on total assets in 2020.
2 The data analysed in this note has been sourced from De Nederlandsche Bank website and companies’ disclosed SFCRs. The data is available on Data zoeken - DNB.
3 DELA has not used the Volatility Adjustment since the end of 2019.