Year of the Rich

We look back on it wistfully, wishing that there was a way to turn back time. The ravages of the coronavirus pandemic make most of us want to go back to 2019 and skip forward to 2021.

There’s more to miss 2019 for.

Turns out that despite political and trade conflicts, our collective wealth grew in the background at the fastest pace since 2005 last year.

This is just one of the surprising findings of the just-released Allianz Global Wealth Report.

Worldwide, gross financial assets jumped 9.7 percent to a record 192 trillion euros in 2019 as the capital markets cheered the injection of funds by central banks into the system.

Central banks and governments may well be the saviors this year too. If the first half is any indication, their steps to protect people from the economic fallout of Covid-19 just might help private households hold on to their financial assets in 2020.

And now for the sobering news.

We didn’t really have to wait for the pandemic to wipe out the progress made in making the world more equal in terms of wealth distribution. 2019 widened the wealth gap between rich and poor countries again, increasing the difference in net financial assets per capita to 22 times from 19 times in 2016.

This is still well below the gap of 87 times that we had in 2000 but the trend reversal is disturbing indeed.

More insights from the annual report, which checks the financial health of households in 57 countries...

A bumper year

If we look back at the headlines of 2019, those related to social unrest and trade conflicts dominate. What was probably easy to miss was the monetary easing steps by central banks.

The capital markets didn’t miss the cues though.

The asset class of securities – shares, bonds and investment funds – jumped 13.7 percent in value last year, hitting a record high of 77 trillion euros. The other two asset classes – bank deposits, and life insurance and pension fund entitlements – couldn’t quite match the buoyancy of securities but they gave no cause for concern either. Life insurance and pension fund entitlements grew at 8.1 percent to 58 trillion euros while bank deposits of private households increased by 6.7 percent to 52 trillion euros.

All this translated into a bumper year for savers. In terms of average per capita household assets, the Americans remained the richest. Switzerland, the Netherlands, Singapore and Taiwan rounded off the top five.

While asset growth is always welcome, Allianz Chief Economist Ludovic Subran cautions against complacency on structural reforms, which he believes are the real drivers of long-term inclusive growth. “For the moment, monetary policy saved the day. But we should not fool ourselves. Zero and negative interest rates are a sweet poison. They undermine wealth accumulation and aggravate social inequality, as asset owners can pocket nice windfall profits. It’s not sustainable,” he says. 

Still unequal

Ludovic’s message is clear in the findings of the report.

The biggest beneficiaries of the 2019 gains were indeed the world’s richest regions - North America and Oceania – each clocking a growth of 11.9 percent in gross financial assets of households.

Even though they continued to grow, emerging markets fell behind their industrialized peers in the catch-up process. Further, the number of households qualifying as global middle class declined to under 800 million in 2019 from over 1 billion in 2018.

Predictably, the concentration of wealth remained in the hands of a few. The richest 10 percent – 520 million households with at least 240,000 euros in net assets – owned roughly 84 percent of total wealth. Of these, the top 1 percent – those with more than 1.2 million euros to their name – owned almost 44 percent.

“It is quite worrying that the gap between rich and poor countries started to widen again even before Covid-19 hit the world,” says Allianz economist Patricia Pelayo Romero. “Because the pandemic will very likely increase inequality further, being a setback not only to globalization but also disrupting education and health services, particularly in low-income countries.”

The average net financial assets per capita better illustrates the divide: It was the highest at 198,000 euros in North America and the lowest at 5,160 euros in Eastern Europe. 

Private households in Northern America hold almost half of the global financial assets (in euros trillion)

allianz global wealth report 2020

Safety first

Given the uncertainties that have persisted for the past few years, caution remains the keyword for people. Households parked their funds in bank deposits for the ninth year in a row in 2019.

Fresh savings rose 18.7 percent to a new record of 3 trillion euros last year, as Americans continued to defy their global image of being big spenders. U.S. households accounted for about 61 percent of all fresh savings. 

Measuring equality

The richest it may be but how equal is the U.S. in terms of wealth distribution?

According to the proprietary Allianz Wealth Equity Indicator (AWEI), the U.S. is actually the most unequal of them all. Japan, on the other hand, sits on the opposite side of the spectrum as the most equal society when it comes to wealth. 

Some other seemingly equal societies also score fairly low on tackling wealth distribution. Who would have thought that Denmark, Sweden and Germany would face such issues? Or that Slovakia, Poland, Spain and Italy would have a fairly even distribution?

But that’s exactly how it is. 

Covid check

Cut to 2020. And to Covid-19.

The pandemic has sent the global economy into its deepest recession in a century, hardly the best news for private wealth. Yet, households may have managed to hang on to their financial assets in the first half of the year and even record a modest growth of 1.5 percent, according to Allianz economists.

They forecast that bank deposits may have increased 7 percent from the end of 2019, thanks to generous public support schemes and precautionary savings. This floats hope that households just might end the year in the black. 

Impact of Covid-19 on global poverty

allianz global wealth report 2020 covid
For a closer look into the financial fortunes and misfortunes of private households globally, click here to read the Allianz Global Wealth Report.  

The Allianz Group is one of the world's leading insurers and asset managers with more than 100 million retail and corporate customers in more than 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 766 billion euros on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage 1.7 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we hold the leading position for insurers in the Dow Jones Sustainability Index. In 2019, over 147,000 employees achieved total revenues of 142 billion euros and an operating profit of 11.9 billion euros for the group.

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

Press contacts

Lorenz Weimann
Allianz SE
As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:
Disclaimer

Further information

Allianz: How Covid-19 is changing claims trends and risk exposures for companies and their insurers

The Covid-19 pandemic is one of the largest economic loss events in history for companies and insurers alike. Claims trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the pandemic, according to a new report Covid-19 – Changing Claims Patterns from AGCS...

Allianz Global Wealth Report 2020: Year of the Rich

A year to miss for several reasons, 2019 was also when global wealth jumped to a new record high. But not everyone benefited. And a positive trend towards financial equality reversed, according to the Allianz Global Wealth Report 2020...

Companies face five liability risk trends in the face of the coronavirus pandemic

Liability exposures for companies around the world are increasing. Factors such as rising litigation, collective redress and large court verdicts, costly and frequent recalls in the automotive and food sectors, the disruptive impact of civil unrest and riots in a growing number of countries, and environmental concerns such as indoor air quality and higher fines and remediation standards will likely impact businesses and their insurers in future, according to a new report from AGCS...