For top insurance companies, customer focus and merger mastery produce superior results

Abstract

PurposeThe purpose of this article is to identify what truly propels property and casualty insurance industry leaders to reach their peak performance.Design/methodology/approachSelection: from an initial list of 706 insurers worldwide, the authors screened for publicly held companies that derived at least 60 percent of their annual revenues from sales of property and casualty products and for which at least five years of detailed financial data were available. The final sample included only companies from advanced economies of North America, Europe and Australia, for a total of 86 insurers. Variables: the regression analysis investigated possible correlations between total shareholder returns and 17 measures of business mix and financial performance, including total revenue growth, total net premium growth and profitability growth. Time period: The authors ran tests on data covering the decade from 1994 through the end of 2004.FindingsConsistent, sustainable revenue growth is the surest path to superior shareholder returns.Practical implicationsWhat sets the top performers in the insurance industry apart is an ability to master two of today's thorniest growth challenges: (1) high‐performance insurers cultivate organic growth by identifying their most valuable customers and investing to increase sales to them; by recruiting new clients through referrals and by lifting retention rates; (2) insurers that rely on mergers and acquisitions to boost revenues make regular, modest‐sized deals to add real value, and they integrate their new acquisitions quickly and seamlessly.Originality/valueProperty and casualty insurers that achieve top‐quartile revenue growth and produce exceptional returns for shareholders weave organic growth and acquisitions into a virtuous cycle of revenue expansion, pursuing deals that reinforce their ability to deliver customer value.