BUSINESS WIRE: Media Release: Allianz Global Wealth Report 2024: Surprising relief

MITTEILUNG UEBERMITTELT VON BUSINESS WIRE. FUER DEN INHALT IST ALLEIN DAS BERICHTENDE UNTERNEHMEN VERANTWORTLICH.

• Surprising relief: Global financial assets of private households increased by 7.6% in 2023, more than making up for the losses of the previous year
• No place for bank deposits: Fresh savings normalized after the pandemic-related boom years as savers gave banks the cold shoulder
• Expected restraint: With interest rates rising, growth in private debt weakened further to 4.1% worldwide, the lowest growth in nine years
• Setback: Higher rates also weighed on real estate assets which recorded the lowest growth in 10 years with a meagre increase of 1.8%

MUNICH --(BUSINESS WIRE)-- 24.09.2024 --

Today, Allianz unveiled the 15^th edition of its “Global Wealth Report”, which puts the asset and debt situation of households in almost 60 countries under the microscope.

Surprising relief

2023 was marked by sharp monetary tightening. But economies proved resilient and markets even boomed. Against this backdrop, global financial assets¹ of private households recorded strong growth: With an increase of 7.6%, the losses of the previous year (-3.5%) were more than made up for. Overall, total financial assets amounted to EUR 239 trillion at the end of 2023. Growth in the three major asset classes was quite uneven. Securities (11.0%) and insurance/pensions (6.2%) benefited from the stock market boom and higher rates and grew significantly faster than the average of the last ten years. In contrast, growth in bank deposits fell to 4.6% after the pandemic-related boom years, recording one of the lowest increases in the last 20 years.

The recovery in 2023 was broad-based. In fact, only two countries – New Zealand and Thailand – recorded negative growth rates. Moreover, growth was relatively uniform across all regions, not least in Asia and North America, which both grew by over 8% – with the USA (8.6%) growing even more strongly than China (8.2%). As a result, the growth advantage of the emerging economies over the advanced economies has shrunk significantly again, amounting to just 2pp last year; in six of the last seven years, emerging economies have largely lost their growth lead. “The comparatively weaker growth of poorer countries reflects the new reality of a fragmenting world,” said Ludovic Subran, chief economist of Allianz. “Until 2017, the year in which the trade disputes between the USA and China broke out, poorer countries still had a growth advantage of 10 percentage points or more over richer countries. We will all pay a price for decoupling but it is the emerging economies that will feel it most. A less connected world is a more unequal world.”

No place for bank deposits

In 2023, the normalization of fresh savings continued after the pandemic-related boom years of forced savings: They fell by 19.3% to EUR 3.0 trillion. This decline was almost exclusively attributable to bank deposits. On balance, banks worldwide only received EUR 19bn, a slump of 97.7%. The main culprit: US households who liquidated deposits worth EUR 650bn. The other two asset classes, on the other hand, remained popular with savers. Inflows into securities even increased once again by 10.0%. However, there was a notable change of favorites within this asset class: while shares were sold on balance in many markets, savers made strong gains in bonds, thanks to the turnaround in interest rates. And insurance/pensions proved to be relatively robust, with the decline in fresh savings worldwide amounting to just 4.9%.

Expected restraint

While financial assets shrugged off the interest rate turnaround, it had a clear impact on the liabilities side of private households' balance sheets in 2023: Growth in private debt weakened further to 4.1% worldwide, the lowest growth in nine years. Overall, the global liabilities of private households amounted to EUR 57trn at the end of 2023. The decline in debt growth was observed in almost all regions in 2023. It was particularly pronounced in Western Europe and North America, where growth more than halved to 1.1% and 2.9%, respectively. As nominal growth in global economic activity remained elevated by inflation, the global debt ratio (liabilities as a percentage of GDP) fell for the third year in a row, dropping by 1.5 pp to 65.4%. This was also more than 3 pp lower than 20 years ago.

Relatively strong growth in assets and relatively weak growth in liabilities led to a significant increase of 8.8% in global net financial assets (financial assets less liabilities). Overall, global net financial assets amounted to EUR 182trn at the end of 2023; this represents an increase of almost EUR 15trn compared to the previous year and is also EUR 4trn above the previous record value from 2021.

Setback

The other asset class that suffered from rising interest rates was real estate. It recorded the lowest growth in 10 years, advancing by only 1.8%; in Western Europe, it fell by 2.2%. But also in the past, the growth rates of real estate have lagged in most markets behind those of financial assets; in North America, for example, the annual gap was almost 1 pp over the last two decades, reflecting the fact that long-run capital gains for real estate are lower than those for equities. But the future is likely to be even more challenging, given the increasing impact of climate change on real estate assets. Although natural catastrophes dominate the headlines, the costs of the transition to climate friendly buildings (so-called transitions risks) will have the bigger impact in the long run. Projections of the House Price Index (HPI) under different climate scenarios up to 2050 show declines of 20% or more for many markets. For all markets under consideration, the value of real estate could be EUR 30trn lower. “In future, housing prices are set to be defined equally by location and by energy efficiency,” said Hazem Krichene, co-author of the report. “But while higher physical risks are unavoidable, transitions risks are not: they are the results of policy decisions. Australia shows the way. An ambitious climate policy could lead to a sharp decline in energy consumption, minimizing the impact on housing prices. The potential big losses in other markets are a clear call for an efficient and effective climate policy. It’s still not too late.”

The interactive “Allianz Global Wealth Map” can be found here on our homepage: https://www.allianz.com/en/economic_research/research-data/interactive-wealth-map.html

You can find the study here on our homepage: Allianz Global Wealth Report 2024

About Allianz

The Allianz Group is one of the world's leading insurers and asset managers with around 125 million* private and corporate customers in nearly 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 741 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.8 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2023, over 157,000 employees achieved total business volume of 161.7 billion euros and an operating profit of 14.7 billion euros for the group.

* Including non-consolidated entities with Allianz customers.

**As of June 30, 2024

These assessments are, as always, subject to the disclaimer provided below.

Cautionary note regarding forward-looking statements

This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties. Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements.

Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in the Allianz’s core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) adverse publicity, regulatory actions or litigation with respect to the Allianz Group, other well-known companies and the financial services industry generally, (iv) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (v) mortality and morbidity levels and trends, (vi) persistency levels, (vii) the extent of credit defaults, (viii) interest rate levels, (ix) currency exchange rates, most notably the EUR/USD exchange rate, (x) changes in laws and regulations, including tax regulations, (xi) the impact of acquisitions including and related integration issues and reorganization measures, and (xii) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities.

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¹ Financial assets includes cash and bank deposits, receivables from insurance companies and pension institutions, securities (shares, bonds and investment funds) and other receivables.

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Lorenz Weimann
Tel. +49 89 3800 16891
e-mail: lorenz.weimann@allianz.com