Savers who want to grow their savings usually have life insurance. In the small world of secure products (Livret A, LDDS, PEL, etc.), this has the advantage of offering the best return today: the funds in euros which are available there – those whose capital is guaranteed – served 1.3% in 2020, according to the Banque de France. However, this figure could have been higher if the companies had returned the entire earnings to their policyholders.
In addition to a remuneration that they can subtract (15% maximum) from this capital gain, they are authorized to set aside each year a part of the return in what is called the “Provision for profit sharing” (also PPB). referred to as “Provision for participation in surplus”). “Very flexible in use, the PPB is the real variable for adjusting rates of return, because it makes it possible to smooth over time the rates of remuneration paid to policyholders under contracts and funds in euros”, explains Cyrille Chartier-Kastler, president of the firm Good Value for Money, in a recent press release.
A potential return greater than 4%
He calculated that the amount of this PPB rises for the year 2020 to 65 billion euros, up 3 billion compared to 2019. In other words, if the insurers decided overnight to distribute this loot, they could offer a rate of 4.52% all at once to their policyholders. Highly improbable scenario, because these reserves are intended to be returned drop by drop, within a maximum period of eight years. They can also be recorded, since the end of 2019, in the insurer’s own funds (while, yes, this money is supposed to go to savers). This provides companies with a safety cushion to meet regulatory solvency requirements.
“The sector has enough to absorb any shocks on the markets and cope with a possible gradual rise in interest rates”, notes Cyrille Chartier-Kastler to signify that rates are not going to collapse. CNP, Predica, Assurances du Crédit Mutuel, Cardif and Sogécap, which are among those with the largest number of contracts, also have the largest PPBs. “By way of illustration, the repayment of this reserve would allow these insurers to support the rates paid on the funds in euros of their customers by 0.73% per year over a period of 8 years “, further indicates Cyrille Chartier-Kastler.
If he previously predicted in an interview with the Insurance platform an average yield of 0.90% in 2021 (with a calculation method slightly different from that of La Banque de France), i.e. “the low point of the level of the rates served”, its analyzes on the PPB give a glimpse of the capacity of insurers to bear the remuneration of funds in euros, whether for the past year or in the medium term.