2019: Life-Annuity Value Creation Strategies - Reorganization and New Players



Price : $1,750.00



Since the financial crisis of 2008, life and annuity insurers have enjoyed almost a decade of positive statutory net income. Over that time, insurers have pursued both organic and inorganic growth strategies to increase net income. This study focuses on the inorganic strategies that insurers have used over the last decade to create value by strategically repositioning their companies.

 


1. Introduction 

2. Executive Summary 

3. Organizational Repositioning to Create Value 

  • Two Value Creation Strategies
  • Organizational Value Creation Case Study Analysis
  • Conclusions and Looking Ahead

4. Capital Redeployment 

  • Regulatory Pressure from Solvency II
  • Shareholder Pressure
  • Product Volatility
  • Conclusions and Looking Ahead

5. The First Wave of Financial Buyers 

  • The New Entrants
  • New Entrants Remain Focused on Annuities
  • New Entrant Value Creation
  • Conclusions and Looking Ahead

6. The Second Wave of New Entrants Emerge 

  • The Second Wave Builds
  • The Second Wave Landscape
  • Runoff Block Attraction
  • Financial Buyer Model Evolves
  • Looking Ahead, Product Expansion

7. Life-Annuity Value Creation Leaders 

  • The Study Universe Groups
  • Metrics and Calculations
  • The Large Companies Value Creation Leaders
  • The Midsized Companies Value Creation Leaders
  • The Small Companies Value Creation Leaders

Appendix 


Introduction

The life-annuity industry continues to generate positive net income. Net income, the combination of operating results and realized capital gains, is the source of value creation for insurance policyholders and shareholders.

Net income is a critical source of value creation for insurers. It allows insurers to increase surplus, enabling growth and risk-bearing capacity while maintaining financial strength. Generating positive net income also allows mutual insurers to return premiums to policyholders in the form of policyholder dividends, while stock companies can return capital to shareholders via shareholder dividends. It is not surprising, then, to see those companies actively seeking new opportunities to generate higher returns by increasing net income.

Broadly speaking, there are four strategies insurance management teams can use to increase net income.

  • They can pursue organic growth. 
  • They can improve operational efficiency. 
  • They can pursue inorganic growth. 
  • Finally, they can restructure the company or products. 

As management teams pursue these strategies, new companies seeking to acquire insurance companies and blocks of business continue to emerge.

This study examines how insurers are working to increase net income and create value for policyholders and shareholders.

  • Using statutory data, we evaluate the relative value creation of different segments of the life-annuity industry.
  • We further identify and analyze the strategies management teams have undertaken to increase value for their companies.
  • We focus on, and analyze, two of those strategies to understand their relative success in creating value.

Finally, we examine the emergence of several new entrants that may signal increased opportunities for insurance management teams to pursue inorganic growth or restructuring.