IBM research shows insurers' returns beat FTSE-100 companies
AIG, AXA and Munich Re are among seven international insurers that have managed to average a shareholder return of at least 22% over the past six years, according to new researchby IBM.
IBM studied 80 of the world's largest insurance companies to find out how insurers achieve growth and shareholder returns. The study was presented at IBM's Global Insurance Executives conference in Berlin last week.
The research revealed that underwriting is more important than revenue growth and market share to insurers.
The research added that insurers make extensive and efficient use of IT to implement everything from underwriting changes to promoting brand image and developing new growth opportunities.
IBM general manager for global insurance Bill Pieroni said: "The top insurers will not write business unless they can get the price they want, no matter how badly they want to grow. Their first criterion is underwriting profit."
Pieroni added that price competition was responsible for many of the challenges that "plagued" the insurance industry because insurance had been sold far too cheaply for several years.
IBM's study revealed seven top insurers, including AIG, AXA and Munich Re, had managed to achieve above average growth in revenue and cash flow.
They also produced average total shareholder return, in real terms, of 29% between 1996 and 2000.
This was 173% higher than the FTSE-100 over the same period and also significantly higher than the S&P 500, the DAX and the Nikkei-225.
The top seven all showed "remarkable" similarities in terms of management structure, discipline, strategy and approach to the regulatory environment, Pieroni said.
Each of the 80 insurers involved in the study had net written premiums of over $1.5bn (£1.03bn). Their total revenue was $1.5 trillion (£1.03 trillion) and the average asset size was $110bn (£75.3bn).