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Lively music

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For the past 20 years, BCG has ranked companies according

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to total shareholder return,

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a key value creation metric,

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which captures the true bottom line for investors.

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And in this year's 2020 edition for insurance companies,

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we look back at the last five years' performance

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of insurance companies,

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but also year-to-date obviously

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given the special situation with the COVID crisis.

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And as a new feature,

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I'm very proud to say we have developed a new deep dive

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on return on equity,

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and what is allowing high return on equity

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and what is allowing low return on equity.

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In this year's report, we have three key main findings.

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Number one, the insurance sector delivered

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over the last five years

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roughly 8% total shareholder return,

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roughly in line with the market.

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But the top quartile did a lot better

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at 20% total shareholder return.

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So there's a wide gap

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and this is mainly driven we found

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by book value growth.

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The growth is the number one driver of outperformance

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our analysis suggests.

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Secondly, year-to-date

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with the corona crisis,

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the insurance sector underperformed

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by some 11 to 12%.

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But I think what is important

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is that this gap has actually widened

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between March and June,

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and this suggests clearly that investors

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have more long-term worries

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about the insurance sector,

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compared to the rest of the market.

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The most surprising finding this year

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was as part of our new return on tangible equity analysis,

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to see the quite enormous performance gap

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between the top and the bottom quartile per segment.

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So take the P&C segment, for example,

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the top quartile operates at as much as 32% return

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on tangible equity,

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and the bottom quartile just at 14,

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so a 18 percentage point gap

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between the top and the bottom quartile.

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Quite enormous, and we don't see this

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in other sectors as much.

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And this just shows, on the one side,

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that sector allocation is key,

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because P&C is very, very strong in terms of performance,

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but within each sector

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there is enormous room to outperform.

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We found really three main differentiating factors

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between the top and the bottom quartile

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in terms of total shareholder return.

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Number one, and most important, is focus.

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Focus on one segment, for example, P&C or Life

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and focus on one to four markets.

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That is what we found

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is driving outperformance most importantly.

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Secondly, capital efficiency

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and cost efficiency are key.

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Not surprising, given insurance operates

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in mainly commoditized markets.

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And thirdly, and increasingly importantly,

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digital leadership.

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Digital leadership, our index found, leads

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to stronger growth, higher net promoter score,

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lower costs, and all together,

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it's what uses over a three, four-time horizon,

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13 to 14% higher book value growth.

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Tremendous outperformance.

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There's a huge opportunity

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for once to make a leap frog to become

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what we call a bionic insurer,

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which just means fully digitizing the value chain,

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leveraging, harnessing the power of artificial intelligence.

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And the good news here is that investors

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actually expect management to invest now,

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because 2020 is anyway a lost year in terms of profits.

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And so now is the moment to develop the skills,

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the capabilities to become a leader tomorrow

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in terms of digital.