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June 2025 - Asset Allocation Life Insurance: Equities decline, property stagnates, alternatives grow
While the capital volume of traditional life insurance policies shrank by more than six billion euros in 2024, unit-linked policies increased by more than 35 billion euros to a new high of almost 216 billion euros. Market values are still around -7.5% below book values. The median net return in 2024 was 2.1% and the market value return was 2.6%. 40% of new investments totalling well over EUR 100 billion flowed into direct bonds, although the ratio fell slightly to just under 39%. Together with mortgage loans and bond funds, interest-bearing investments accounted for a good 75% of total investments at the end of 2024. The equity quota has fallen slightly further to just over 4%, the property quota remains at around 7.5% and the weighting of alternatives continues to grow to around 11.5%.
The investment volume of the 44 health insurance companies in Germany grew by 4% to 373 billion euros in 2024. The companies thus achieved a net return of around 2.3% and a market value return of around 4%. A good 40% of the new investments of more than EUR 40 billion made in 2024 flowed into direct bonds, which cover a good half of total investments. Together with mortgage loans and bond funds, interest-bearing investments have a total weighting of more than 77%. The share of equities has fallen further below five per cent. Real estate and alternatives (Private Equity, Private Debt, Infrastructure) account for a good 7% and almost 10% respectively.
While the pension obligations fell by 0.5% in 2024 at an almost constant discount rate, plan assets increased by ten billion euros to 309 billion euros. The coverage ratio thus reached a new high of around 80%. Almost half of the capital is invested in bonds. The equity ratio has remained relatively constant overall at around 21%, although there were companies with both increasing and decreasing equity exposure. Real estate accounts for a good 6% of investments, while alternatives increased slightly to just under 8%. The remainder is invested in insurance contracts, derivatives and liquidity. The 38 DAX/MDAX companies with a minimum investment volume of EUR 500 million achieved a return of just over 5% in 2024 (capital-weighted value 5.1%, equally weighted mean 5.4%, median 4.8%). The results ranged from -1.3% to +14.7%.
The investment capital of the 91 pension funds for liberal professions increased by a further EUR 13 billion to over EUR 285 billion in 2023. The institutions reduced the weight of bonds the most during the low-interest phase, meaning that they had the greatest need to increase their bond volume in the course of the interest rate turnaround. In 2023, many Versorgungswerke focused on direct bond investments and net new investments of around EUR 6 billion increased the ratio by almost 2% to just under 22%. The total bond ratio including bond funds and mortgage loans rose to just over 41%. By contrast, the equity ratio fell significantly for the second year in a row to less than 16%. The real estate ratio also fell by around one per cent to just under 23%, which was partly due to necessary write-downs. By contrast, the alternatives ratio rose further to almost 19%.
Due to the short duration of usually less than five years, savings banks suffered particularly quickly from the low interest rate phase in the direct fixed-interest investments. In 2023, however, the 100 largest savings banks with total assets of around EUR 935 billion and a Depot A securities volume of around EUR 165 billion generated interest income of almost EUR 2 billion in direct investments. This is more than three times the value of 2021 or roughly the level of 2014. With special funds of well over EUR 55 billion, they achieved a performance of 4% on average, based on market values.