The top 20 global public insurance companies reported aggregate revenue of $1,923.9 billion in 2020, a year-over-year decline of around 5%, according to data and analytics firm GlobalData.
11 firms reported a drop in revenue and the most notable were UK-based insurers Prudential, Aviva and Legal & General.
Most of the top companies were not only affected by a decline in investment returns due to a lower interest rate environment, but also witnessed decline in new business activities and, subsequently, premium income.
Prudential was mainly impacted due to a substantial rise in outward reinsurance premiums, which amounted to $32.2 billion from $1.6 billion in the previous year, as it paid the majority of the amount to Athene Life Re for reinsuring its in-force fixed and fixed index annuity business.
This brought down its net earned premiums steeply by around 75%. In addition, a 5% decline in gross written premiums on account of lower new business premiums from Asia, and lower sales of fixed annuities and fixed index annuities in the US, abetted the revenue decline.
“Unlike Prudential, Aviva suffered due to its weak investment returns, especially from its UK & Ireland Life business; and manage-for-value business in France and Italy; where its income from investments dropped by 51%, 70%, and 28%, respectively,” said Parth Vala, Company Profiles Analyst at GlobalData.
“To mitigate the lower investment returns and focus more on the UK, Canada and Ireland markets, Aviva has been selling off its non-core businesses to channelize the gains for developing its core markets and increasing shareholders’ return.”
Vala noted how Legal & General derives approximately 80% of its revenue from investment activities and, as a result, a 26.1% contraction in its investment income in 2020, which stood at £39.2 billion, as compared to £53 billion in the previous year, greatly impacted its revenue stream.
“A roughly 37.1% drop in gains on financial investments designated at fair value through profit or loss and 24% decline in dividend income adversely affected the overall investment return of the company,” said Vala.
“Another major insurer that was impacted was Zurich Insurance Group. The insurer’s revenue stream from investment income almost halved over that in the previous year, reaching $12.3 billion from $24.8 billion, which was owing to roughly 56% decrease in investment results on unit-linked investments related to its life insurance business.
“The remaining nine players reported subdued-to-moderate revenue growth with Allianz, China Life and China Pacific insurance reporting a y-o-y growth rate of 10%.
“However, Dai-ichi Life outperformed the top players, with its revenue growth surpassing 20%, as the weaker Yen allowed the company’s returns from its investments to soar significantly over the previous year.”