Solvency II SFCR & QRT Analysis Life Insurers. October 2017

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1 Solvency II SFCR & QRT Analysis Life Insurers October 2017

2 SFCR High Level Messages o This year, insurance companies have for the first time (publicly) disclosed their Solvency and Financial Condition Reports (SFCRs) and Quantitative Reporting Templates (QRTs) o We have selected the top-10 life insurers in The Netherlands on solo entity level, based on total own funds. The selected life insurers are: o Nationale-Nederlanden Levensverzekering Maatschappij N.V. o Aegon Levensverzekering N.V. o Achmea Pensioen- en Levensverzekeringen N.V. o SRLEV N.V. o Delta Lloyd Levensverzekering N.V. o ASR Levensverzekering N.V. o Allianz Nederland Levensverzekering N.V. o Generali levensverzekering maatschappij N.V. o Loyalis Leven N.V. o SCILDON N.V. (previously Legal & General Levensverzekering Maatschappij N.V.) o Significant differences in SII ratio can be observed between the selected life insurers, ranging from 115% to 238% with an average of 165%. o A lot of attention was on the LACDT this year and so this presentation includes some dedicated slides: o Only Allianz and Scildon could substantiate the full LACDT (25% of SCR); o LACDT can help insurers to increase their SII ratio, however, it seems that only those who already have a high SII ratio are able to make full use of the LACDT. 2

3 SFCR Analysis SCR and Coverage Ratios 4 Technical Provisions 11 Own Funds 13 Investments 15 3

4 SCR and Coverage Ratios

5 Solvency II ratio Significant differences in SII ratio can be observed between life insurers. The average SII ratio for the selected life insurers is 165%. The top-3 are Scildon (238%), Allianz (211%) and NN Life (203%). The life insurers with the lowest SII ratio have taken actions in 2017 to increase their SII ratio. 5

6 SCR by Risk Module (SF & PIM) As expected, Market risk and Life Underwriting risk are the dominant risk components. The diversification benefit is larger for the life insurers with a Partial Internal Model (NN & Aegon). Please note that insurers with PIM may use a slightly different setup for the SCR reporting in the QRT s. LACTP is rarely used in The Netherlands, this might be explained by fact that future management actions are not fomally recorded. * = PIM * * Please note that Op and LACDT = % of net SCR, LACTP = % of gross SCR, others are % of BSCR before diversification 6

7 SCR by Risk Module As expected, Market risk and Life Underwriting risk are the dominant risk components. The diversification benefit is larger for the life insurers with a Partial Internal Model (NN & Aegon). Please note that insurers with PIM may use a slightly different setup for the SCR reporting in the QRT s. Total range Please note that Op and LACDT = % of net SCR, LACTP = % of gross SCR, others are % of BSCR before diversification 7

8 LACDT The majority of the life insurers have made use of the LACDT, despite the additional (stricter) interpretation provided by the DNB (3 February 2017). There are only two life insurers that could substantiate the full LACDT (25% of SCR) 8

9 SII Ratio vs. LACDT Insurers with a high SII ratio also tend to have a high LACDT LACDT can help insurers to increase their SII ratio, however, it seems that only those who already have a high SII ratio are able to make full use of the LACDT. 9

10 SII Ratio vs. Market Risk Insurers with a high SII ratio also tend to have a high Market Risk SCR Insurers with higher SII ratio are better capitalized, allowing them to take more investment risk 10

11 Technical Provisions

12 Risk Margin The average ratio of Risk Margin / TP is 3,3% for life insurers and is much lower than for non-life insurers (6,2%) Allianz and Scildon have a relatively low Risk Margin / TP ratio. This is probably due to the fact that these life insurers have a relatively large unit-linked portfolio. 12

13 Own Funds

14 Own Funds Tiering SRLEV and DL Life have relative lower quality of own funds. 14

15 Investments

16 Investments & Mortgages In general, the graph reflects the derisking that has taken place: low in equities, high in bonds Most life insurers invest 30% in mortgages; Allianz and Aegon invest more than average in mortgages, Loyalis and Scildon do not invest in mortgages 16

17 Investments - Bonds In general, most of the investments in bonds are in government bonds. Please note that in this graph no distinction was made in the type of government bond. 17

18 Miekee Lam, PhD Senior Consultant FRM Actuarial & Insurance Risk Tel: Mob: lam.miekee@kpmg.nl Helen Stijnen Director FRM Actuarial & Insurance Risk Tel: Mob: stijnen.helen@kpmg.nl KPMG on social media KPMG app The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG Advisory N.V., registered with the trade register in the Netherlands under number , is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks of KPMG International.