Life insurance: good outputs in 2007

Source: M. - C. (the Newspaper of Finances)

The output of the contracts in euros is rising. The insurers benefitted from the increase of interest rates in 2007.

In this morose re-entry, the savers have a good reason to be delighted: the contracts of life insurance in euros, i.e. to guaranteed capital, offer good outputs. The results 2007 already published are higher than those of the previous year. An event, because since ten years he was necessary to resign to a slow but regular erosion results. Why this change of course? The insurers profited from a context more favorable thanks to the voltages recorded on the obligations to first half of the year.

A more favorable bond market

For the first time since long years, managements could get paper ata rate comparable with that of the bonds expiring, acquired during time of high rates. As for the more recent contracts, in particular those of generation Internet which do not have the large one incur to manage, they benefit full with this favorable economic situation. Certain contracts, in addition, profited from judicious arbitrations on the markets shares. “The first party of the year was rather positive, explains Hubert , delegated general director of , and allowed us to release some additional resources.”

In addition, turbulences of the summer did not weigh on the results. The crisis of liquidities which caused sharp voltages on the short rates benefitted the placements from treasury, which can reach a significant percentage of the wallet of the contracts. Lastly, the lack of confidence generated differentials of rate between the government loans and the obligations of the private companies which do not have escaped with the most opportunist managements. They thus garnered high-output bonds without to be exposed to big risks.

If these positions do not have yet a negotiable instrument on the outputs 2007, they are of good quality for the next year. Besides several society announces immediately the color, offering a minimum rate for 2008. It is the case for example of the Savings bank, which displays 4,5 % guaranteed for the contract Nuance 3D, or Direct, which proposes 5 % in 2008 on Direct-Life, in addition without deposit charges. Enticing offers, but which relate to limited amounts and certain assets allocations (for example, 24 008 euros to the maximum at , with at least 40 % of the sums invested on monetary units) or which are reserved for one period of very short subscription (until March 31st only for Nuances 3D).

Inflation erodes the real outputs

2007 is thus a good year, but these brilliant results must be relativized because, in real rate, the outputs appear less flattering. In 2006, the funds in euros brought back on average 4 %, which, with an inflation of 1,6 %, leaves with the saver a output of 2,4 %. On the basis of the optimistic assumption of an average return of 4,30 % for 2007, the real rate will be brought back to 1,9 % if inflation 2007 remains at the level estimated by INSEE at the end of November over twelve running monthes, that is to say 2,4 %.

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Various contracts

To know what a life policy can report, it is necessary to know… of which contract he acts. There are indeed two kinds.

The first are the traditional contracts in euros (old contracts in francs).
 With them, your capital is guaranteed by the insurer and is raised each year of the interests been useful by the company. The output depends on the financial management of the aforementioned and is in general announced once the completed year.

The seconds are contracts “ supports”, or in monetary units.
 They are broader, because, inside the same contract, you have the choice between several different types of investor (each one is one of the “supports” of the contract). In general, there are thus at least funds or support in euros - which functions like a contract in euros - and three profiles of management: a “careful” placement, which counts few shares, a support “balances”, more invested out of Stock Exchange, and another, “dynamic”, which put, him, very largely on the shares. If you invest your saving on these profiles, your capital is not guaranteed any more: you can lose part of your setting. Many insurers also periodically propose funds with formula

Lastly, certain contracts supports offer in addition to the specialized placements (for example of the SICAV on the only French, American shares…).

Profiles of management

The more the profiles hold shares, the more they suffered these three last years, because of the hull slamming of the Stock Exchange.

In 2004, many Équilibre profiles lost more than 10%, and some more than 15%. Depreciations exceeded even 25% on certain dynamic placements. Contrary, if the Stock Exchange set out again, that would more benefit the profiles which count the most shares.

Contracts and supports in euros

A forsaken time, they know a great success again. Because they are risk-free and their outputs remain gravitational, even if they lowered these last years.

The good contracts still paid between 5% and 5,50% (Net of administration fee, but before social samples and possible tax) last year. It is 2,5% to 3% of more than inflation. And, especially, more than what the other risk-free placements report: 3% Net for the Booklet have, approximately 2% (before taxation) for the monetary SICAV, between 4% and 4,50% (before taxation) for an etc, government bond

Attention, the outputs are unequal according to the establishments and the contracts. The banks are often the least generous: they are useful in general between 4,50% and 5% only.

Prudence also on the supports. Many of their supports in euros are less profitable than truths contracts in euros (including in the same insurer). But there are many exceptions.

To choose the right formula

If you wish on the Stock Exchange, it is necessary to choose a support. If you prefer the security, a good contract in euros will meet your aim… but a support with a powerful support in euros will also be appropriate to you, with freedom moreover. Because, which knows? In ten or fifteen years, you will be perhaps happy to have other supports of investment at your disposal in your contract

The advised duration of a contract of life insurance is eight years minimum. But the fall of their output is to be provided for these next years. It is thus necessary to be particularly careful with the expenses on payment and to compare the various market offers well.

The main attraction of the funds in euro is the security. But the possibility of the multimedia contract, will enable you to diversify your saving, while combining at these funds in euros at more dynamic funds in shares or securities first.

Their outputs are variable according to the supports and the risk, but are largely higher than the funds in euros. The advantage of this type of investor is to adapt to the economic situation, the rise or the fall, and the objectives of the contract holder. However only the investors ready to take risks will place their saving on monetary units.

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2006

Many contracts in euros for the first time paid less than 4% this year. The savers must show themselves more selective.

Each year, the life insurance, placement fetish of the French, pays a little less. It is the inescapable consequence of the fall of interest rates on the financial markets, since more than one decade. The savers resigned themselves there, but this year, by receiving their account statement, much of them nevertheless had a shock: the fall is often very clear, at least for the funded capital on supports or contracts in euros

Some lost - in one year only - up to 0,50%, like at Maaf Assurances, which fall from 4,88% to 4,38%. And of the contracts, traditionally famous for their good outputs move back, them, of approximately 0,30%. That of passes thus from 4,75% to 4,41%.

Of course, others resist better or even are maintained. But this generalized fall has a negotiable instrument for a long time dreaded by the insurers, because highly symbolic system: many contracts, among the least powerful, pay for the first time, less than 4%. “All in all, there is the feeling that the fall accelerates on the market compared to the previous years”, stresses Laurent , works manager and produced “life” with the .

Why? The insurance companies in general have a great room for maneuver to control with their own way the one year outputs on the other. They can in particular make “reserves”, i.e. to put side part of the gains carried out during the year and to redistribute them with the savers only the following years.

Thus, they prevent that remunerations do not fluctuate too much of a exercise on the other. “These last years, to continue to display very good rates, certain insurance companies largely drew from the reserves made up in the past. But, from now on, they do not have of it any more much, which them constrained to accept a more important retreat of their outputs”, estimates Laurent .

Subtle play of the “reserves”

A contrario, other insurers preferred to show themselves less generous these last years. But today, their reserves are still well furnished, which helps them to maintain their outputs or at least to attenuate their erosion. Lastly, other companies explain the modesty of the rates been useful in 2005, not by the reserves passed, but by those garnered today for tomorrow! “We put side the equivalent of 0,40% of output in 2005, to prepare the future. We are 8 years old to redistribute it with the policy-holders. Our objective is to thus smooth remunerations of the contracts for the years to come”, explains Christian , chairman of the directory of Vie, the subsidiary of life insurance of Banque Populaire, which was useful between 3,65% and 4,12% last year on the majority of its contracts.

Shares with the rescue

But the management of the reserves explains only partly the performance gaps from one company to another. The financial choices of the insurers, also, played. Because 2005 were one year ostentation out of Stock Exchange, and those which invested most largely in shares are happiness.

Those represent between 4% and more than 10% of the wallet according to the companies. “We carried out important appreciations. That enabled us to offer good outputs in 2005, and to even make some concerning the continuation”, stresses Didier , directing life and offers financial at Azur .

A group which was distinguished… by increasing the outputs been useful on its contracts headlights last year! Azur Assurances changed to them his of 4,50% in 2004 to 4,55% in 2005.

The makes a jump even more spectacular, since it is used also 4,55% for the bond of 2005, but against 4,35% in 2004. Explanation: it carried out a profitable financial transaction thanks to the divestment of its participation in the French layer , bought up in 2005 by a Spanish society.

Of this avalanche of results, the French can at least learn three lessons. One, the best contracts - those which paid more than 4,40% - are still today near traditional insurance companies and of associations of savers. Present for a long time in life insurance, they constituted the essence of their wallets at the beautiful time, and still hold inventories of old obligations which pay around 6% to 8%. Even if they are reduced, they continue to dope the outputs.

Two, the bankers did not have the same chance, and are in addition very greedy in expenses. Their contracts appear as well as possible in the good average, and, more often, in back of the pack.

Three, the insurers do not discuss all their customers on an equal footing. They are numerous to choose to favor a contract, in general that which they want to sell most actively, with the detriment of the others. It is simple: it is enough to unequally distribute the financial gains generated by the whole of the collected saving.

For this reason, for example, to the , the contract Initiatives Transmission reported only 3,85% last year, whereas Nuances 3D, marketed more actively, saves the honor with 4%. The same mishap strikes today also often the titular customers of old contracts, which are not sold any more and which the insurer sacrifices without states of core.

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GLOSSARY

Additional amount

It is a payment carried out by your employer on your Savings plan undertaken . The amount of this aid depends on its generosity but also on the sums placed by your care on the . This gift can go up to three times the payments which you carried out, with the proviso of not exceeding 2.287 euros a year 95 200 francs). If you buy shares of your own society, the roof passes to 3.430 euros 28 523 francs). To note that the additional amount cannot depend on the appreciation which concerns your employer your work.

Assets allocation

The finance professionals use this expression to explain you (like every month the Income does it) which one should not put all its eggs in the same pack. To allocate its capital, it is thus to distribute its saving between various placements in order to reduce the risks and to obtain a regular average profitability in time. Within the framework of the management of a stock exchange wallet, the assets allocation indicates the distribution of the saving between the liquidities, the obligations and the shares. Within the compartment made up exclusively of shares, the money can be affected by geographical area and line of business.

Tax credit

It is a tax credit. To profit from it, it is necessary to be shareholder of a French firm which distributes dividends. The amount tax credit it corresponds then to half of the paid dividend on your account. In practice, you state the dividend increased tax credit it and, then, the administration deduces this last from the amount of your income tax. This mechanism was installed to avoid a double taxation of the dividends, already taxed with the bond with the tax on the earning with society. If you manage your wallet within the framework of a Savings plan in shares, tax credit is versed for it on your account and you do not deduct anything of your income tax.

Recipient

Nominate the person who will cash the capital of your life policy, after your death. It can be a question of your spouse, a child, or any other person who are particularly expensive to you. So that this saving does not remain in the cases of the insurer after your death, you can be tried to inform the recipient of the gift that you intend to him. But, in this case, will know that if it accepts it by advance while being made known near the insurer, you will not be able to change recipient never again, nor to carry out withdrawals, even partial, without its authorization. This is why, there is preferable to remain discrete on your intentions and to designate your recipient by will written in the notary. You will be thus with the shelter of the bad surprise.

Capitalization

The retreat by capitalization is a formula of individual saving where each one accumulates money in its corner with a view the constitution of a capital. This saving can be placed on various supports, of which the life assurance. The retreat by capitalization is defined as opposed to the retreat by distribution, system in which the contributions of paid and the free lances are used to pay the boarding houses poured with the current pensioners.

Deducted expenses

The life assurance is a powerful placement. However, of the companies still market products very penalizing for your saving. These contracts told “to deducted expenses” take, with the subscription, the expenses on all the payments to come. Thus, the contributions of the first, and sometimes even as the second year, serve to pay the Commissions of the insurer and the salesman. And capitalization begins only the second, even the third year. Concretely, the deducted expenses reduce the output of your saving. And if you want to recover your capital before term, you are likely to perceive a sum lower than that of your payments. Before signing your contract, thus redouble vigilance. The deduction at source meets especially in the contracts with one duration periodic payments of at least ten years and which are dedicated to the retreat.

Liquidity

It is the possibility of recovering its money. Thus, the Booklet has, the #9B392C Booklet and the CODEVI is among the most liquid placements of the market, because you can constantly carry out withdrawals without any penalty. On the other hand, if you hold shares of or shares of society not - dimensioned and that you wish to sell them quickly, you are undoubtedly obliged to accept a strong rebate compared to their actual value. These products are thus not very liquid. By extension, the liquidity of a quoted on the stock exchange share corresponds to the daily volume of transactions, i.e. with the number of bonds which change hands during a meeting of Stock Exchange. The more liquid one share is and the more you can be reactive. Indeed, if the volume of exchanges is important, it is easy to buy (or to sell) with a limiting exchange rate which you fixed and for the desired quantity. Contrary, the liquid bonds not very can see their suspended quotation several hours by Euronext, the organizer of the Parisian market. It is what arrives when the number of the purchasers and the salesmen is very unbalanced.

Mandate of management

Legal term which indicates the contract that you sign when you entrust the management of a rental housing or a stock exchange wallet to a professional. More or less regulated according to the trades, these contracts are in the beginning many litigations. To avoid the problems, the role of the professional, his Commission and the nature of the management which you wish must be clearly defined. Within the framework of the management of a wallet of transferable securities, specify what you understand by a careful management, balanced or dynamic. If these conditions are met, the mandate of management will avoid you managing yourself your money and will make you profit from the expertise of a professional, which, a priori, must enable you to obtain a higher profitability

Levy at source

It is a directly versed deduction at source with the tax authority by the financial institution which holds your placement. The rate of this taking away is identical for all the taxpayers. Concretely, for the incomes of certain placements (super-booklets, accounts in the long term, obligations…), you have the choice between a levy at source to 25 % or the income tax. Knowing that, in this last case, you will be also forwarded to a social sample of 10 %. The choice between these two options depends on your level of imposition. The higher it is and the more you may find it beneficial to choose the levy at source. If you choose this optional tax regime, you must indicate it to your banker.

Renunciation

After having subscribed a life policy, you have one thirty days period during which you can reconsider your decision. If it is the case, you will recover the entirety of the versed sums. During this “time of renunciation”, the insurer has the choice between placing your saving in monetary SICAV or investing it directly on the stockmarkets, by adhering to the option of management which you determined with him. The companies which directly invest the collected funds assume the risk of retractation of the subscriber. If the stockmarkets fall, for example of 10 %, before the thirty days expiry, the insurer takes this loss as his responsibility in the event of renunciation of the saver.

Usufruct

At the time of a succession, it happens that there is a stripping of property. This operation consists in separating two rights which are normally joined together: usufruct, i.e. the right of use of a good (for a housing, to live it or rent it to receive rents), and the naked-property, which are a future right to the freehold with the death of the usufructuary. The stripping of property is also a technique of desfiscalisation. While giving, for example, the naked-property of your dwelling to your child, you can continue to live on your premise while reducing the rights to pay. The saving in tax varies according to the age of the giver. If you have between 50 and 60 years, the chargeable basis of a good forwarded in naked-property is equal to its actual value minus 30 %. And, with the death of the usufructuary, the bare owner recovers the full ownership of property without paying taxes.

Volatility

It is an risk indicator of a quoted on the stock exchange bond or a SICAV. The larger volatility of a share is, the more it is speculative. In technical term, volatility is the amplitude of the variation of an exchange rate for a given period. The statisticians speak about variance or standard deviation. As example, the average volatility of the SICAV French shares was slightly higher than 22 % in 2000, with considerable differences between the funds, since the least risky displayed a volatility lower than 5 %, against more than 40 % for riskiest. What does not want to say that the latter are less good. They are addressed simply to a category of savers who agree to take risks in the hope to carry out more important gains.

Net assets value

Indicate the price on the one hand SICAV or CPF. This price integrates the management expense, but it does not understand the deposit charges on the payments nor the removal costs. To determine the sum to spend at the time of the subscription of shares of SICAV, you must take account of the deposit charges, often negotiable, ranging between 0,5 and 5 % of the net assets value. When you wish to resell your shares, you will have to deduce from the amount of your saving the removal costs, fortunately increasingly rare. The lower the potential of gain of the funds is and the more you must attach importance to the expenses. To pay 3 or 4% at the entry of a SICAV shares is more acceptable than 3 or 4% at the entry of a monetary SICAV.