Insurance value creation rises amidst regional disparities

Asia Pacific contributed just over $100b to the five-year total.

Value creation in the global insurance industry showed some recovery in 2023, driven by rising share prices, according to Boston Consulting Group’s The 2024 Insurance Value Creators Report.

Regional disparities in value creation are clear. The Americas saw the highest growth, with 12.8 points of its 20.7% Total shareholder return (TSR) attributed to growth. In contrast, growth in Europe contributed just 0.3 points to the region's 18.7% TSR, whilst in APAC, growth accounted for 4.1 points of its 17.1% TSR.

The distribution of value creation over the last five years highlights regional differences. The Americas contributed over half of the industry’s total value creation, with $418b of the $810b in gains. 

EMEA’s value creation was two-thirds of the Americas’, whilst APAC contributed just over $100b. Within APAC, Greater China and Korea underperformed, whilst Japan posted strong results.

Whilst many insurers operate globally, value creation and business conditions vary widely across regions and industry segments, reflecting the unique challenges and opportunities in property and casualty, life and health, reinsurance, and multiline insurance.

TSR increased to 11%, up from 8% in 2022. However, the industry's five-year TSR (2019–2023) remains behind most other sectors, and over the past decade, returns have often fallen below shareholders’ cost of equity, estimated between 8% and 11%. 

This has contributed to a gradual exit of capital from the sector, with insurers’ share of global capital markets falling from 3.2% in 2018 to 2.4% in 2023.

Despite these challenges, individual segments, regions, and companies have seen strong performance. 

Approximately two-thirds of insurers now generate TSRs exceeding their cost of equity, a significant improvement compared to the previous year. Top-quartile insurers posted annual returns between 16% and 44% from 2019 to 2023, with an average of 19%, well above the all-industry TSR average of 9%.

The property and casualty (P&C) segment, particularly in the US, along with reinsurance, has been a standout performer, generating almost 40% of the industry's total value during this period. 

The top-quartile insurers globally achieved a five-year average annual TSR of 19.1%, with 6% coming from growth in tangible book value (TBV), 7.5% from multiple expansion, and 5.6% from cash flow.