DBRS: Bancassurance in France — A Steady Contributor to Banks’ Earnings

Large French banks have developed substantial bancassurance businesses, with strong market shares in the domestic insurance market, especially in life insurance and it has made a steady positive contribution to the growth of the large French banking groups’ profits in recent years. Based on DBRS calculations, the contribution of insurance activities to the consolidated parent banking institutions’ earnings has been very stable, representing on average around 14% of operating divisions’ pre-tax profits. In addition, DBRS estimates that the aggregate pre-tax profit from insurance activities in 2017 was EUR 6.3 billion, having grown at an annual average rate of 5% since 2013. The positive trend in French banks’ insurance profits has been underpinned by the overall growth in the French insurance market over the last five years.

DBRS expects this trend to continue. Strong positions in life insurance complement the banks’ savings offerings for customers. In addition, insurance represents substantial opportunities for cross selling, especially taking into account French banks’ strong domestic and international position in financing services such as home lending, consumer lending or vehicle finance, where insurance is sold as a complementary product. Insurance can also support growth through increased penetration of existing customer bases or through new partnerships.

DBRS notes that the insurance activity also reduces French banks’ reliance on net interest income, and as a result French banks are relatively less dependent on net interest income than many of their European and global peers. However, DBRS also notes that the current low interest rate environment has reduced life insurance profits.