This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Equity Analysts Expect Higher Profitability From Insurers Despite Difficult Market Conditions, According To Accenture Survey

Stocks in this article: ACN

Insurance equity analysts expect higher profitability, despite difficult market conditions, from the best-performing insurers and will reward those that expand into emerging markets, according to findings of a global survey by Accenture (NYSE: ACN).

Commissioned by Accenture and conducted by Institutional Investor Market Research Group, the survey queried 68 leading insurance equity analysts in 16 countries and covered a diverse range of topics, including profit and growth strategies in the context of major industry challenges.

The survey reveals that the equity analysts expect the insurers they recommend with “Buy” ratings to deliver an average pre-tax return on equity (RoE) of 14.9 percent in 2012, compared to 13.7 percent in 2011. Profitability expectations will continue to rise, with half of the overall respondents expecting higher pre-tax RoE in the next three years from insurers with “Buy” ratings.

“Given that the average pre-tax RoE was 11.8 percent in 2011 for the 20 largest global insurers 1, the expectations set by the equity analysts for 2012 are quite challenging,” said John Del Santo, global managing director of Accenture's Insurance practice. “The overall industry is affected by the difficult economic conditions and ever-more stringent regulatory environment, while property and casualty insurers have to struggle with higher volatility of catastrophe claims and life insurers with low interest rates and weak demand. Insurers will have to convince the analyst community that they have the right strategy to navigate these challenges while raising the bar for revenue growth and profitability, if they want to earn superior ratings.”

Analysts reward expansion into emerging markets

Expansion into emerging markets is considered by analysts as important or critical to earn superior ratings:

  • All P&C insurance analysts said merger and acquisition (M&A) initiatives by North American, European and Japanese insurers into Brazil, Russia, India, China, Mexico or South Korea are an important or critical driver of superior ratings over the next three years.
  • A majority (88 percent) of life insurance analysts said organic growth in these emerging markets is important or critical to earn superior ratings in the next three years.

“While emerging markets may be crucial to the future performance of global groups, they are no panacea,” said Thomas Meyer, managing director of Accenture's Insurance practice for Europe, Africa and Latin America. “Many countries are resisting the efforts of global carriers to enter their markets and compete against local firms. Also, the lack of homogeneity of emerging markets, where the cultural differences are more significant than in Europe, makes it difficult for insurers to achieve economies of scale across borders. Thus, a global operating model which allows the insurer to capitalize on its proven assets, processes and capabilities, while adapting to local needs, is essential to expanding into such markets profitably.”

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs