The top 20 global public insurance companies reported aggregate revenues of $1,923.9bn in 2020, a y-o-y decline of around 5% in their top-line performance. Eleven companies reported a drop in revenue – the most notable being UK-based insurers Prudential, Aviva and Legal & General, according to analysts at GlobalData.
Most of the top companies were affected both by a fall in investment returns and a decline in new business and premium income.
Outward reinsurance premiums were behind most of Prudential’s woes, amounting to $32.2bn from $1.6bn in the previous year. This decreased its net earned premiums by some 75%. In addition, a 5% decline in GWP due to lower new business premiums from Asia, and lower sales of fixed annuities and fixed index annuities in the US, contributed to revenue decline.
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 channel gains towards the development of its core markets and increasing shareholder return.
Legal & General derives approximately 80% of its revenue from investment activities. As a result, a 26.1% contraction in its investment income in 2020, which stood at £39.2bn, as compared to £53bn 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.
Zurich Insurance Group’s revenue stream from investment income almost halved over that in the previous year, reaching $12.3bn from $24.8bn, owing to a decrease of around 56% in investment results on unit-linked investments related to its life business.
GlobalData’s Parth Vala said: “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.”