* The performance of Chubb and Ace are as separate entities in this analysis

The specific carriers that fit this study's two high-performance criteria represents a nuanced list of differences in scale and market focus. Looking first at the group that delivered economic value across all cycles and average growth above the market, we see that these carriers consistently operated at CR levels that significantly exceeded requirements for economic value creation, and often with growth rates far above the market (somewhat aided by a smaller size that drives larger percentage growth).

DPW Growth vs. Combined Ratio Consistent Economic Value Creators with Above Market Growth
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In the second group of carriers that have created economic value and market sensitive growth rates we see carriers that are watching the market and taking the growth that is available to set underwriting and pricing guidelines. Given the above observations on the performance of the large carrier segment, it is not surprising that the large carriers in this sample (such as Ace, Chubb, Travelers) have moderate growth rates, as they have observed the market conditions and aligned their market approach accordingly, pulling back as needed to preserve economic value generation.

DPW Growth vs. Combined Ratio Consistent Economic Value Creators with Market Sensitive Growth
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Expense management is table stakes: High performance is achieved on the loss ratios
To understand factors behind cost structure performance, a simple disaggregation of loss and expense ratios over time leads to a clear conclusion that our high performers were significantly better in delivering world class (and consistently below overall market) loss ratios, while the relative difference was less pronounced for expense ratios.

Notably, high performers have made sustainable reductions in expenses through the crisis. As a result, expense ratios have shrunk in the post-crisis recovery, while the bulk of the market appears to have abandoned its temporary belt-tightening, resulting in climbing expense ratios even as DWP levels have climbed.

Loss & Expense Ratio Comparison
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From an aggregate perspective, the large carriers may well be “too big to succeed” while the small carrier is sub-scale and “too small to win.”

While consistent delivery of economic value is an unequivocal requirement for high performance, it can be achieved either by consistently achieving above-market growth (as the mid-sized carriers generally have done) or with market sensitive, opportunistic growth and avoidance of large, disruptive exits (the larger high performers generally belong here).

The natural conclusion is that higher-performing large carriers have balanced out underwriting cycles to deliver economic value, but to get growth they must have the market insights to assess which baskets within the portfolio they should place their bets on. They then need the organizational agility to aggressively go after these opportunities while taking a more measured approach to other parts of the portfolio. Pursuing profitable growth across a very large portfolio is a likely path to value destruction. This is a very difficult line to walk for larger carriers, especially if an enterprise level focus on driving growth is pushed without differentiation across business units.

Expense management will continue to be a prerequisite for high performance. With expenses under control, high performance is then achieved by maintaining a competitive loss ratio through market insight, agility and discipline. Growth for growth’s sake, as it turns out, does not increase value and may in fact make real value harder to create.

Kenneth Saldanha is a Managing Director in Accenture’s Insurance Strategy Practice, and focuses on Transformation and Value Creation programs with carriers, brokers and TPAs in Commercial and Personal lines.

Soren Petersen is an executive in Accenture’s Insurance Strategy Practice; he helps carriers define value creation opportunities and innovative approaches to capture that value.

Special Reports /

Carrier analysis: Attaining, maintaining high performance in the U.S. commercial lines market

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