Study Identifies Diversification, M&A Activity and Innovation as Critical to Value Creation for Life Insurance Companies
Pearl River, N.Y., August 1, 2018 – ACORD, the global standards-setting body for the insurance industry, today announced the release of The ACORD Global Life Insurance Value Creation Study, sponsored by Oracle. The study leveraged in-depth financial analysis, data-driven research, and interviews with industry leaders to answer key questions about global industry performance, the metrics that correlate most strongly to shareholder returns, and the strategies and capabilities that support high performance.
The study analyzed six years of data across 50 companies, 17 countries, and over 20 lines of business, representing 1/3 of global life Net Premium Written. By analyzing multiple financial performance metrics and carrier attributes, ACORD was able to identify critical best-practice capabilities across the value chain.
“When we took a look at all the data, some of the implications were quite surprising,” said Bill Pieroni, President & CEO of ACORD. “The study showed that none of the traditional, commonly used financial metrics showed a statistically significant correlation to total shareholder return.” Instead, ACORD’s research found the following characteristics corresponded most closely with successful value creation:
- Diversification – Business mix shows a striking correlation with total shareholder return, with successful value creators having a more balanced book between Life and P&C lines than their competitors. Additionally, diversity of brands tends to result in higher returns, as do non-centralized structures.
- M&A – Value creators engage in a significant amount of M&A activity relative to their competitors. However, they are more likely than the others to engage in divestitures over acquisitions, and more likely to execute cross-border deals.
- Innovation – Leveraging technology through innovation, either as a sole strategic focus or part of a mixed strategy, tends to support high performance.
“Because of ACORD’s role in the insurance industry, we are in a unique position to gather data and present research of this sort,” Pieroni said. “The unmistakable correlation between successful value creation and embracing innovation supports what many have been saying for some time now – we must embrace digitization and other forward-thinking technologies in order to thrive in our rapidly changing business environment. ACORD will continue to provide research, as well as standards and tools, to enable success for our members and the industry as a whole.”
The ACORD Global Life Insurance Value Creation Study is available for download to ACORD members at www.acord.org. Further details of the study, as well as other ACORD research, can be made available to ACORD members by request.
ACORD (Association for Cooperative Operations Research and Development) is the global standards-setting body for the insurance and related financial services industries. ACORD facilitates fast, accurate data exchange, and efficient workflows through the development of electronic standards, standardized forms, and tools to support their use. ACORD members worldwide include hundreds of insurance and reinsurance companies, agents and brokers, software providers, financial services organizations and industry associations. ACORD maintains offices in New York and London. Learn more at www.acord.org.
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