Executive summary

Life business in force

Gross written premiums

After a sharp decrease in 2008 as a result of the financial crisis, European life premiums are expected to recover to €625bn in 2009,
which corresponds, at constant exchange rates, to a 4.6% increase on the previous year. In Europe, the bulk of the life business is in
the UK, France, Germany and Italy, which together account for 70% to 75% of European life premiums. Among these markets, only
the UK witnessed a decrease (-10%) in 2009. This decline is the result of the continued fall in new business observed over the first
three quarters of 2009, due to the recession. Conversely, France, Germany and Italy showed significant improvements (respectively
+13%, +7% and +49%), mainly driven by a rise in single premiums in new business. The clear trend among households to increase
their savings in 2009 benefited the guaranteed-return products offered by life insurers in some countries.

As a result, life premiums as a proportion of total premiums dropped from 63% in 2007 to 59% in 2008 and then rose
again to 61%. Looking at the breakdown of life premiums, it seems that the financial crisis and the uncertainty in the stock
markets made unit-linked products less attractive since, on average, their share of total life premiums fell from 30% in 2007
to 22% in 2008 and to 18% in 2009. At country level, this ratio ranges from 5% in Bulgaria to 59% in Slovenia.

In terms of the split between individual and group contracts, individual contracts predominate in most countries and on
average accounted for 70% of life premiums in 2009. In the UK, the split is fairly even while in Slovenia, Sweden, Switzerland
and especially Norway and Denmark, group contracts account for the lion’s share.

Insurance density and penetration1

On average European policyholders spent €1 086 on life insurance products in 2009 versus €1 084 in 2008 and €1 309 in
20072. There were significant differences between countries, ranging from €2 602 in Denmark down to €12 in Latvia and
Turkey. Generally, life insurance density is very high in the large financial centres as well as in the Scandinavian countries.

Following the economic downturn, life insurance penetration dropped from 5.6% in 2007 to 4.6% in 2008 and then
recovered to 4.9% in 20092. Similarly to density, life insurance penetration shows large disparities between markets, varying
in 2009 from 0.2% in Latvia to 9.5% in the UK.

Number of contracts and population coverage

CEA estimates indicate that more than 520 million life insurance contracts were in force in Europe at the end of 2009, which
corresponds to a decrease of around 1% decrease compared to 20083. This means that more than 90% of the European
population is covered by a life insurance policy. At country level, however, this coverage ratio ranges from less than 10%
in Latvia to more than 400% in Sweden. In terms of the split between individual and group contracts, CEA figures indicate
that, on average, 70% to 80% of life insurance policies in Europe relate to individual contracts.

Benefits & provisions

After seven successive years of increase, life benefits paid by European insurers remained stable at around €600bn in 2008
(+5-6% at constant exchange rates) and then dropped to slightly more than €500bn (-9% at constant exchange rates). The
UK accounts for more than one third of this total amount. A 15% fall was recorded there in 2009, mainly driven by ordinary
life insurance products, with a reduction in payouts on maturity and on surrender. France, the second largest market in terms
of benefits paid (18% market share), registered a 7% decline.

1 Insurance penetration is a commonly recognised indicator of insurance activity. It is expressed here by showing total gross written premiums as a
percentage of GDP
2 Liechtenstein, Luxembourg and Lithuania are not included in the CEA averages, due to missing data
3 Belgium, Iceland, Ireland, Liechtenstein and Lithuania are not included in the CEA aggregate, due to missing data
Gross technical provisions for life insurance in Europe followed a largely similar growth pattern over the period 2000-2007
(ie a steady increase) but then went down by 4.5% at constant exchange rates in 2008, mostly due to the UK. 2009 showed
a recovery (+7.3% at constant exchange rates) to a total amount of more than €5 120bn at the end of the year. The UK and
France together account for almost 60% of overall European provisions. Following the financial crisis, the share of provisions
for unit-linked products in the total declined from 42% in 2007 to 36% in 2008 and then amounted to 37% in 2009. The
UK and France reported ratios of 65% and 17% respectively in 2009.

Investments4
As insurance companies are among the largest institutional investors, the fall in stock markets that followed the financial
crisis and the rise in spreads put insurers’ investment portfolios under pressure in 2008. Since the life insurance industry
accounts for more than 80% of European insurers’ total investment portfolio, life insurers were particularly affected. Their
investment portfolio, estimated at market value, is estimated to have declined from over €5  900bn in 2007 to around
€5 200bn in 2008. This was the first time in the last decade that the year-on-year growth rate was negative.

With the capital markets rebound observed from mid-March 2009, the investment portfolio of European life insurers is
expected to recover to more than €5 500bn in 2009. This corresponds to an increase of more than 8% at constant exchange
rates, compared to a similar drop the previous year. The largest European insurance investors are in the UK, France and
Germany, accounting for almost two thirds of life insurers’ total portfolio.

New life business

Premiums
Following the financial crisis, the number of new life contracts in Europe declined substantially in 2008. As a result, premiums
for new business decreased from around €280bn in 2007 to almost €230bn in 2008, the drop being mainly driven by the
UK. In 2009, new business premiums recovered slightly (+4% at constant exchange rates), largely due to an almost 60%
increase in new single premiums in Italy. In France and Germany, new life business premium income grew 33% and 13%
respectively, whereas the UK reported a 26% drop.

Similarly to the business in force, individual policies account for the lion’s share, with more than 80% of European new life
premiums. Among these individual contract premiums, savings contracts predominate, with an average of more than 70%,
whereas annuities and protection contracts account for slightly less than 25% and 2% respectively.

Distribution channels

New individual premiums5

Bancassurance is the main distribution channel for new individual life premiums in many European countries, with a market
share ranging from 58% in Estonia to more than 87% in Portugal. Agents outnumber brokers in the distribution of individual life
insurance products in all the countries of the sample apart from Belgium, France and the UK. Agents are particularly widespread in
Poland, Romania, Slovakia and Slovenia. Brokers lead the individual life insurance new business market in the UK (69%). Although
employees do not constitute the main selling channel in any market in the sample, they are quite popular in Estonia (39%), France
(15%) and Romania (13%). Distance selling, which had been seen as a potential threat to traditional channels for life insurance,
reaches its highest level in the UK (9.6% of new individual business), but is almost nonexistent in the other countries.

New group premiums6

The relative dominance of bancassurance observed for group policies is less striking for new individual policies, since in the
sample it is only in Portugal and Spain that bancassurance is the major distribution channel (82% and 43% respectively).
Agents and brokers dominate several markets such as the UK, Malta and Slovenia. In Poland and Romania, new group
contracts are mainly distributed directly by insurance company employees. In those countries, many companies show a
preference for direct management of these group contracts rather than working with intermediaries, since group contracts
are generally more valuable than individual contracts. Direct writing is the major channel in Belgium, whereas in the
Netherlands group contracts are fairly evenly distributed between direct writing and intermediaries.

4 Since the split of the investment portfolio between life and non-life insurers’ is not available for some countries from 2008 onwards, life insurers’
investment portfolio for 2008 and 2009 has been estimated on the assumption that their market share has remained stable at 80%
5 The countries surveyed are Belgium, Estonia, France, Italy, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and the UK
6 The countries surveyed are Belgium, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Spain and the UK