The insurance industry faces certain fluctuations driven by changing economic conditions, financial market volatility and unpredictable events, which can then lead to significant impact to the insurers’ financial performance. However, companies such as Zurich, Chubb and AXA have demonstrated consistent profitability amid the fluctuations.
In a report by Moody’s Ratings, the ratings company said that these companies, known for their diverse business models and strong franchises, have demonstrated consistent profitability. This stability not only supports their capital positions but also enables them to manage stresses and capitalize on emerging market opportunities.
One of the key factors that enables these companies to maintain stable earnings is their diversification across various insurance lines and global markets.
According to the report, Zurich, Chubb, and AXA are all well-established players in property and casualty (P&C) insurance, which forms the backbone of their businesses.
Each company also has significant operations in other areas of insurance. AXA holds a prominent position in life and health insurance, while Chubb also operates in accident, health, and life insurance markets. Meanwhile, Zurich generates substantial revenue through its life insurance operations and its fee-based management services to U.S.-based Farmers Exchanges.
This geographic and product diversification has enabled these companies to mitigate risks associated with specific sectors and regions, helping them remain resilient even in challenging market conditions, the report said.
These diversified revenue streams have proven beneficial for these companies during periods of market volatility.
Moreover, the strong and consistent earnings of these insurers have contributed to their robust capital positions. Zurich and Chubb have shown strong capital generation capabilities despite external challenges, including catastrophe claims, the COVID-19 pandemic, inflationary pressures, and rising interest rates. AXA, through its transformation efforts, has also improved its capital generation, with its Solvency II ratio demonstrating sustained growth.
According to Moody’s, the companies’ robust capital positions give them the flexibility to manage adverse market conditions, as well as the ability to pursue growth opportunities.
In response to increased claims from natural catastrophes, the insurers have adjusted their portfolios to reduce exposure to certain risks while continuing to expand their P&C books. Their strong balance sheets have also enabled them to pursue inorganic growth, as seen in AXA’s acquisition of XL, Chubb’s purchase of Cigna’s life operations in Asia-Pacific, and Zurich’s acquisition of AIG’s global travel insurance business, the report said.
