Life insurers sum up 2023 and look positively towards the future
The German Insurance Association (GDV) publishes its Annual Review of the development of private pension provision through life insurance, Pensionskassen and Pensionsfonds.
"Overall, it was not an easy year for life insurance companies. However, with over 85 million contracts, private pension provision remains an integral part of old-age provision in Germany", says Moritz Schumann, Deputy Chief Executive Officer of GDV in the 2023 Annual Review.
2023 in facts and figures
The Annual Review reflects the fact that private households increasingly chose shorter-term forms of investment in 2023, postponing long-term decisions such as regarding retirement provision. Although the inflation rate fell again over the course of the year, uncertainty remained high and economic growth was weak. This had a particular impact on the single-premium business, which fell by 15.7 percent to EUR 25.8 billion. Current premiums remained unchanged at EUR 66.3 billion. Overall, however, premium income (including from Pensionskassen and Pensionsfonds) fell by five percent.
Life insurers, Pensionskassen and Pensionsfonds paid out a total of EUR 99 billion in insurance benefits to their customers in 2023. That is EUR 271 million per day, a new record.
Basic pension contracts reach new high
Basic pensions developed positively. The number of contracts in this segment has increased steadily in recent years, with around 134 thousand new contracts being concluded in 2023. This was 14.2 percent more than in the previous year. The portfolio thus grew by 4.8 percent to around 2.7 million contracts and income from current premiums to EUR 4.4 billion.
Life insurers are positive about the future
Conditions for life insurance are already somewhat better in the current financial year 2024. However, the weak economy and the merely tentative decrease in interest rates continue to cause headwinds. For life insurance as a whole (including Pensionskassen and Pensionsfonds), premiums are expected to fall by 2.6% from the previous year.
Trend reversal expected as of 2025
A trend reversal is in sight from 2025. According to GDV’s forecast, the German economy will develop more dynamically and inflation rates will continue to fall. In addition, real household incomes are likely to continue to rise, while inflation falls. This could lead to a positive slope in the yield curve again next year, from short to long maturities.
The rising degree of surplus sharing will further increase the attractiveness of the products for old and new customers. An increase in the maximum actuarial interest rate to 1.0 percent from 1 January 2025 will also have a positive impact on life insurance. Insurers will then be able to offer their customers higher guarantees again.
