European Insurer Value Analysis 2021, conducted by ACORD and Alchemy Crew – a ground-breaking study of the financial performance of 40 leading European-head quartered insurers, together representing more than €1.2tn in annual revenue.
The five year average performance was 7.5% cash flow return on invested capital, with top-quartile performers returning 16.9% and bottom quartile 4%.
Key Learning Points from the study are:-
- Be ruthless with the new investment business case – is business value well deﬁned? Who is the sponsor? What is the return on investment? Does the business case still stand under stress tests?
- Re-evaluate investments on a regular basis – don’t be afraid to halt projects which become obsolete or don’t deliver the original value. The pounds and euros can be used better elsewhere.
- Deploy ‘state of the markets’ technology, such as best of breed – ‘bleeding edge’ might not deliver the returns.
- Buy not build – with rapid technological innovation across insurance and ﬁnancial services, someone would have most likely already solved the problem you are facing – the solution might lay in banking, payments, or even government work, but it most certainly exists already.
- Find the right partner to deliver – you would beneﬁt from their resources, know how and lessons learned elsewhere.
With 12% points between the bottom and top quartiles measuring cash flow return on capital employed seems only right to take heed of these tips and read the full report.
The methodology used in the report was cash flow returns over invested capital. Using the cash flow metric enabled ACORD to compare the performance of property and casualty (P&C) insurers, life assurers and bancassurers on a like-for-like basis. The five year average performance was 7.5% cash flow return on invested capital, with top-quartile performers returning 16.9% and bottom quartile 4%.