Delivering sustained economic value across business cycles is an elusive goal. To understand the “secret sauce” behind high performance, Accenture assessed the performance of the 50 largest P&C carriers in the U.S. market, for both commercial and personal lines, during the 10-year period from 2004 to 2013. The firm then split these results into three distinct market periods: pre-crisis (2004-2007,) crisis (2008-2010,) and post-crisis (2011-2013).

This article focuses on commercial lines and seeks to identify high-performing insurers. For purposes of this study, high performance will be defined in two ways, reflecting distinct strategic approaches to the market.

1. Consistent economic value creation and consistent above market growth. Carriers in this group:

  • Consistently produce a combined ratio that generates a return on equity above the cost of equity. Calculating the CR level required to generate economic value includes a number of factors (such as surplus levels and investment income) and yielded a CR threshold of 95 for the 10-year period with varying levels in each year.
  • Consistently deliver above market growth.

2. Consistent economic value creation and market sensitive growth. Carriers in this period:

  • Consistently produce a combined ratio that generates a return on equity above the cost of equity.
  • Grow faster than the overall market in at least one period while avoiding market disruptive exits (defined by direct premium written declines of more than 5%).

To assess consistency,performance was evaluated within three periods with distinct value creation conditions:

Market Periods

Key Characteristics

Pre- Crisis (2004-2007) – Economic Value Creation and Growth

  • Market delivers economic value and underwriting profit
  • Relatively high investment returns and stable cost of equity
  • Premium rates shifting from rising to declining environment


Crisis (2008 – 2010) –

Risk Aversion,  Lower Investment Returns and Declining Rates

  • Market delivers underwriting loss and well short of delivering economic value
  • Lower investment gains due to decreased interest rates
  • Significantly more capacity enters the market
  • Cost of Equity substantively increases


Post Crisis (2011-2013) – Increased Risk Appetite, Increased Capacity / Competition

  • Market delivers underwriting loss well short of delivering economic value
  • Investment gains start to rebound
  • High capacity levels remain in the market
  • Cost of Equity back to long term, normalized levels


The population analyzed included the 50 largest carriers (based on 2013 DPW) and, while the focus of our analysis is on individual high performers, the study also examines performance in three different size tiers to assess distinct corollaries between size and performance:

  • Large carriers with above 2%in market share and more than $5 billion in premium (9 carriers)
  • Mid-sized carriers with 1% to 2% in market share and more than $2.5 billion in premium (17 carriers)
  • Smaller carriers with less than 1% in market share and $1 to $2.5 billion in premium (24 carriers).

DPW Growth vs. Combined Ratio (by size tiers)
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The implications are clear and can best be described as “too big to succeed, too small to win,” as the large and small carrier segments have struggled in the aggregate and have been out-performed by the mid-sized carrier segment.

In the aggregate, large carriers have consistently operated at a cost structure above the economic value threshold, and the longer term combined ratio level is five points above the threshold, implying consistent value destruction. The small segment is performing even worse, with an average combine ratio approximately seven points above the threshold for driving economic value.

The medium sized carrier segment emerges as the best performing segment, significantly outperforming the other segments by producing economic value and solid growth.

The Envelope Please: The High Performers
Not surprisingly, a larger number of medium sized carriers were able to meet the primary criteria of consistent economic value generation.



Distribution of High Performers by Size Segment
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Consistent Economic Value Creation and Above Market Growth


Consistent Economic Value Creation, Market Sensitive Growth


-   Delivered economic value every year

-   Best 10 year CR (79.2) & 5th CAGR (13.1%)



-   Cost structure consistently much better than other large carriers

-  10 year average CR (88.4) is 10th best


-   Delivered economic value every year

-   9th for 10 year CR (87.4) & 3rd CAGR (17.8%)



-   14th best cost structure overall and 2nd of large carriers (10 avg. CR of 92.3)

-   Best and most consistent growth performance of large carriers

FM Global

-  2nd best cost structure (10 year avg. CR of 80.1) and economic value every year

-   Above market average growth



-   18th best cost structure overall and 3rd of large carriers (10 year average CR 93.3)

USAA Group

-   Delivered economic value every year

-   6th 10 year CR (86.3) & 6th CAGR (11.0%)



-   Stable economic value delivery

-   13th 10 year CR (91.6) & 25th CAGR (3.7%)

Philadelphia – Tokio Marine

-   11th in 10 year CR (89.8) and 8th in 10 year growth CAGR (10.1%)


HCC Insurance

-  4th ranked CR (84 10 year avg.)

-  Above market average growth

* 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.