Global insurance companies created more value for their shareholders over the past five years than other industries, a report has revealed.
The report, released today [Friday] by the Boston Consulting Group, analyzed stock market data from January 2012 to December 2016, and found the global insurance sector experienced an 18.5% annual increase on its share price return for investors over that period.
In the top-quartile, the top performers in the Americas were: Lincoln National (life), Sun Life Financial (life), Hartford
Financial Services (multiline), Allstate (P&C), Cincinnati Financial (P&C), AIG
(multiline), and Fidelity National Financial (P&C).
In the second-quartile were: American Financial Corp (multiline), Principal Financial Group (life), Torchmark (life), Manulife Financial (life), Assurant (multiline), and Prudential Financial (life).
The top-quartile performers actually averaged a 25.3% rise. There were 13 insurers from America in the top 42 global insurance performers on the list.
“While there are many individual stories and underlying dynamics, capital allocation has played a meaningful – and sometimes dominant – role in the winners’ success,” said BCG senior partner Pia Tischhauser, global leader of BCG’s insurance practice and co-author of the report. “Many companies can still emulate the playbook of recent winners with portfolio restructuring and efficiency moves. Others need a new game plan. Going forward, industry leaders that want to deliver a new era of value creation will have to evolve their playbook and refocus their efforts on growth.”
According to the report’s authors, who analyzed 10 years of insurer’s share price data, almost all total shareholder return for the top-quartile “value creators” came from corporate growth.
Those same companies, though, as well as others in the sector, face “tough headwinds”, the authors said, particularly with “product commoditization, digital disruption, and changing customer behaviors”.
Companies that have grown have performed best, the authors stated, returning the highest dividends. Going forward, the challenges currently facing the industry will likely also provide the biggest opportunities.
“The outlook for the commercial and reinsurance markets is potentially exciting,” it was explained. “The rise of massive new industries and large category risks, including climate change, artificial intelligence, autonomous vehicles, and cyber-related risks, are big areas of opportunity.”
Of particular note, the BCG authors – perhaps preaching to the converted here – say insurers who develop robust tech-driven analytics and tech-based consumer interactions are those most likely to continue to prosper.
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