European asset managers are facing growing competition from insurers that have made a large push into outside money management, according to consulting firm Cerulli Associates.
Five of the six major insurers in Europe saw an increase in third-party assets in 2017 compared to the year prior, Cerulli said in a report Friday, citing Generali, AXA, Allianz, Swiss Life, and Aviva Investors. Among the top six listed by the consultant, only Standard Life Aberdeen saw third-party assets decrease slightly last year.
“The top insurer-owned managers are now on an even footing with the big asset management houses when it comes to winning pension money,” said Justina Deveikyte, associate director of European institutional research at Cerulli, in a statement on the findings. “One executive told us that firms are losing ‘huge volumes’ of business—and investment talent—to insurers.”
Insurers are a natural fit for many pension plans because they are “liability-driven investors with long track records in low-risk, income-generating strategies,” according to the report. Insurers are particularly strong in fixed-income because they’ve invested in corporate bonds for a long time, Cerulli said, and they are rich in cash to seed new products and deliver them to market.
Insurance companies also have plenty of room to grow in managing outside money, meaning the competition will likely rise for traditional asset managers. Asset management accounted for less than 10 percent of the earnings of most of Europe's listed insurers in 2016, according to Cerulli, which cited data from Citigroup.
“With insurers possessing deep pockets and solid offerings, managers must decide whether to take them on at their own game, plug-and-play into their distribution networks, or branch into new areas of specialism to show that there are still things the investment industry can do that insurers cannot,” Cerulli said in the report.
Among the top European insurers, Allianz had the most third-party assets at the end of last year, with €1.45 trillion ($1.65 trillion) under management, according to the report. Axa was the second largest manager of outside assets, overseeing €651 billion, the report shows.