2015: Growth and Profit Leaders in Commercial Lines - Specialization, Segmentation, and Alignment Drive Results
Conning’s latest Strategic Study identifies those commercial property-casualty insurers that consistently display long-term, superior financial performance, and analyzes their common characteristics. Conning’s property-casualty commercial lines growth and profit leader companies were chosen from a commercial lines universe of property-casualty groups after screening for consistent long term growth and profitability. Analysis of the common attributes of these leading companies centers on specialization, segmentation and concentration, along with technology, distribution, investments, and management incentives.
1. Introduction
2. Executive Summary
3. Defining Superior Financial Performance
- Overall Universe of Commercial Insurers
- Breakdown of Performance Metrics by Benchmark
- Summary
4. Specialization, Segmentation, and Concentration
- Specialization Strategy Predicated on Profitability
- Specialty Line of Business
- Frequency of Line of Business
- Geographic Concentration
- Hiring Specialist Resources
- Summary
5. Technology, Distribution, and Investments
- Technology
- Distribution
- Investment Performance
- Summary
6. Management Incentives
- Management Alignment with Financial Performance
- Focus on Profits over Growth
- A Difference Among Other Insurers
- Dividend Paying Ability
- Reserves
- Focus on Financial Benchmarks
- Summary
Appendix
Introduction
The purpose of this Strategic Study is to identify common characteristics among commercial property-casualty insurers that consistently display long-term, superior financial performance. Some of these characteristics were relatively obvious, such as the degree of industry specialization, geographic focus, or technological leadership. Others such as controlled growth or management ownership were less apparent. The relative impact of individual characteristics was difficult to quantify and may not be, in isolation, a significant contributing factor to overall outperformance. However, Conning articulates in this study that multiple characteristics, when present in an individual company, clearly drive financial outperformance.
Conning also determined that top-performing commercial property-casualty insurers could be large or small companies, with focused strategies or strategies that permit diversification along lines of business, as long as management incentives are in place to drive superior financial performance. Interestingly, very few midsized commercial insurers, which had neither a single product line nor a single-state focus, nor which demonstrated the type of diversification that larger, publicly traded insurers typically portray, produced superior financial performance. Later in this study, Conning suggests some of the reasons that contribute to the absence of these midsized insurers.