“Sustainable value creators” among the 100 largest property/casualty insurance carriers generated more than twice as much
of their value through underwriting than through investment activities over a 20-year study period, according to a new analysis from ACORD.
In addition, in a departure from similar ACORD studies that Carrier Management has previously reported on from past years, almo
st half (48) of the 100 insurers destroyed value, according to ACORD’s “2025 U.S. Property & Casualty Value Creation Study.”
Three years ago, ACORD found that just over one-third (36) of the 100 largest insurers destroyed value. And in a 2021 comparable study, only 9 of 100 were value destroyers.
As was the case in all the prior studies reviewed by Carrier Management, ACORD’s 2025 study, released in mid-December last year, identified value creators and value destroyers by d
etermining whether 20-year returns exceeded a prescribed benchmark.
Creators exceeded the benchmark over the study period; destroyers d
id not. (More precisely, the study examined cash flow in excess of an 8.2% cost of capital as the measure of value. Related textbox, “Defining Value Creation”)
The ACORD analysis breaks the value creators into two categories: sustain
able value creators that meet the required return threshold through underwriting and investment activities, and hollow va
lue creators that do so through investment returns only while failing to generate value from underwriting.
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Tallying the numbers, while 52% of companies were value creators, just 35% were sustainable value creators— achieving a 13.
5% return on capital and generating $324 billion in value, according to the latest study. “Through their consistent disciplined
focus on core insurance operations, these carriers created significant value through underwriting while simultaneously gener
ating respectable investment gains”—$229 billion of value from underwriting and $95 billion from investments.
Defining Value Creation
Markets will draw capital away from firms not achieving baseline minimum returns. Therefore, ACORD measured the amount of free cash flow generated through both underwriting and inve
stments versus a mini
mum required capital
charge. This required rate of return, which an investor could have achieved by investing in a diversified portfolio of investments, was represented by the retu
rns of the S&P 500 over the 20-year period: 8.2 percent.
This year’s cost of capital is the highest measured in recent years.
Analyzing 17 hollow value creators, ACORD said that their underwriting operations consumed $85 billion of the $121 billion crea
ted through investments—resulting in a net value created of $36 billion. “If not for their investment income, they would have fallen into the value destroyer category. Their dep
endence on investment income illustrates how precarious their pos
ition is and how much the industry continues to depend on a source of revenue other than its core competence of underwriting,” the report says.
In addition, ACORD’s research revealed:
• The largest carriers tended to generate more sustainable value in the U.S. P/C market, according to ACORD’s research. “More companies in the largest quartile [with net w
ritten premiums greater than $6 billion] achieved sustainable value creation, and fewer of them destroyed value, than any of the smaller quartiles.”
The report puts companies writing less than $2 billion as the lowest quartile. Other quartiles are $2-3 billion, $3-6 billion and over $6 billion.
A graphic in the report shows that 30 of the 52 value creators wrote premiums above $3 billion, and 28 of the 48 value destroyers wrote less than $3 billion.
“In past decades, larger scale was more frequently associated with value destruction in the P/C industry. The emergence of larger carriers achieving sustainable value creation suggests that a new advantage of scale is emerging—one that is not simply operational but informational,” the report says.
• Sustainable value creators have roughly half of their insurance portfolios in personal lines and half in commercial. The business mix of hollow value creators tilts more heavily toward commercial lines (56% commercial vs. 44% personal), while value destroyers emphasize personal lines (64% personal vs. 36% commercial).