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Fitch: Cost Efficiency Remains Key for Dutch Insurers' Profitability
December 17, 2014 / 2:52 PM / 3 years ago

Fitch: Cost Efficiency Remains Key for Dutch Insurers' Profitability

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2015 Outlook: Dutch Insurance here LONDON, December 17 (Fitch) Fitch Ratings says that cost efficiency will be a key driver of Dutch insurers' profitability and sustainability of business models as the domestic insurance market is mature and highly concentrated. The life sector continues to shrink and pressure to reduce operating costs is high. In a new report, Fitch says that it expects the Dutch life market to contract in 2015 and views this as negative from a rating perspective, although it is counterbalanced by the benefits of cost cutting. The falling demand for life products, together with lower interest rates, has hit profitability in 2014 and this trend will likely continue into 2015. In addition, competition is tough and increases pressure to cut costs even further. The need to cut costs in a mature and saturated market is exacerbated by the structural decline of life insurers' business amid fierce competition from banks on saving products. This could spur further consolidation between insurance companies. The Dutch non-life market has been stable and profitable since the financial crisis began in 2008, with profitable underwriting amid sluggish growth. This stability is likely to continue in 2015, in Fitch's view, despite the increasing shift to price aggregators that could add further downward pressure on pricing, and signs of deterioration of claims experience. The Dutch health insurance market, which is the largest in Europe, makes modest but stable profits, with competition focused on procurement costs and customer service. Barriers to entry are high due to the large scale needed to operate efficiently. Fitch therefore believes that the competitive landscape will not change significantly in 2015. Overall Fitch expects that the issues faced by the life sector in 2014 will worsen in 2015, while the non-life market will remain stable and profitable. This underpins the negative sector outlook for the Dutch life insurance market and the stable sector outlook for the non-life market. The rating outlook for the Dutch insurance market is negative, reflecting the mix of Outlooks on individual rated companies. The Negative Outlooks on some company ratings stem from the Dutch state's bailout of certain bancassurance groups, which had an adverse knock-on effect on their respective insurance operations. The report "2015 Outlook: Cost Cutting Pivotal to Insurers' Profits - Low Interest Rates and High Competition Challenge Insurers' Business Models" is available at or by clicking the link above. Contact: Federico Faccio Senior Director +44 20 3530 1394 Fitch Ratings Limited 30 North Colonnade London E14 5GN Marc-Philippe Juilliard Senior Director +33 1 44 29 91 37 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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