This isn’t where insurers wanted to be at the outset of the 2020s: Total Shareholder Return (TSR) has been hovering around an average of 5%, and interest rates are painfully low in developed markets. But it hasn’t been that bad for everyone. Insurers in the top quartile supplied TSRs about triple the industry median. In this overview of the 2021 Insurance Value Creators Report, the Boston Consulting Group provides an idea of what differentiates the top-quartile performers, and how your company might take steps to be among them.
Total Shareholder Return (TSR) for the insurance industry has been dropping since 2016; concerned insurers should take steps to embrace digital technologies.
For every insurance segment, total shareholder return (TSR) went into decline between 2016 and 2020. Reinsurers took the most painful fall, from nearly 15% to 4.9%, multiple-line insurance companies dropped 5 percentage points, and while P&C companies managed to outperform other segments due in large part to lower capital intensity and short-tail dynamic, they still experienced a drop over the years preceding 2020.
The first year of the 2020s was tough on most industries, but fortunately, 2021 has been a little better for insurers. With people staying home, auto and workers’ compensation claims declined, and life insurance claims stayed manageable. Weather events and pandemic-related losses were hard on property and casualty insurers, but overall, in 2021, insurance stocks started to recover after their 2020 slump. In the end, insurers were able to help people through a very bad time, and the industry can still claim the pandemic as an earnings event.
Nathalia Bellizia, Davide Corradi, Eric Wick, and Edoardo Palmisani are professionals with the Boston Consulting Group.