The financial strength of German life insurers is mainly determined by their returns achieved on the capital markets as well as their profit margin of their insurance business. Customers are looking for financially strong ensurers providing them with a high level of profit participation – in addition to covering the guaranteed interest rated and the sums insured. Given that consumers invest an important portion of their income in life insurance, they are looking for a long-term relationship with insurance partners having good financial health. Insurance brokers, advising their customers on the choice of the life insurer are required to compare life insurers before giving advice. Our ranking provides such an independent benchmark analysis.
Measuring Financial Health.
To quantify a life insurer’s financial health we use the Economic Capital Ratio. It is simply the company’s available capital divided by its assets. This ratio enables us to rank and compare insurers of different size. Indeed, it is not the size that matters, but whether the insurer has the financial means to be resilient in adverse situations. Computing the economic capital of a life insurer is the core of RealRate’s computational model. Picking the most important information from the annual business reports, we transform those accounting values to economic market values. This approach is especially important for German life insurers since their statutory accounting relies on book values often being quite different from fair market values. In addition, their business model and corresponding accounting is difficult and deviates from other industries. The Economic Capital Ratio is a forward-looking key ratio capturing financial health in just one figure.
In 2021 HUK-Coburg is Germany’s strongest life insurer. Its biggest strengths are the high insurance business margin as well as the the high statutory own capital being far above the market average. in total this yields a top Economic Capital Ratio of more than 11%. The second place goes to Familienfürsorge, having a very high own capital. And on the third place we have Lebensversicherung von 1871, expected to have high returns on its insurance business. These companies as well as the other Top Rated life insurers will be able to provide a high level of profit participation, even in times of continuously low interest rates.
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