3 Things – Harnessing Opportunity, Investments Point to Transformation & Earnings Highlight Industry Health

Hi Friends!  Here is the latest edition of ‘3 Things We Learned’ our weekly post where we use the headlines from the week in the insurance industry to tell the story and tie everything to recurring themes.  For the third week in row, earnings reports were plentiful and offered key insights into the health of the industry along with trends that are shaping the future of our industry.  In addition, insurtech investment, acquisitions, launches and partnerships continue to steam ahead and focus on taking advantage of opportunities.  As we fly through February, 2024 is at full speed, let’s delve into this week’s storylines to discover what we learned.

Acquisitions, Launches and Capitalization Seek to Harness Opportunities

A series of acquisitions, launches, and capitalization efforts aim to harness emerging opportunities and address the evolving demands of the market.  Collectively, this week’s stories reflect the current industry trends of transition, strategically navigating acquisitions, embracing innovative launches, and capitalizing on opportunities to define value propositions and harness opportunity.

Howden Group’s acquisition of ARM Group Holdings Ltd. is a move to add to its service offerings, adding ARM’s expertise in captive management to its portfolio. This acquisition reflects the broader industry trend towards consolidating specialized capabilities to better serve multinational clients and navigate the complex regulatory landscape.

Meanwhile, Hagerty’s $18.4 million acquisition of an Everspan underwriting company underscores the shift towards direct underwriting models and controlling capacity. This approach not only aims to retain more underwriting profits but also seeks to innovate product offerings and improve customer value, particularly in the niche market of classic and enthusiast vehicles.

Ryze Claim Solutions’ partnership with Bain Capital Insurance for recapitalization represents another investment from Bain’s $1.17B fund focused on insurance. This move aims at organic growth and strategic acquisitions, leveraging technology to streamline claims management processes across various sectors.

DOXA Insurance Holdings’ launch of the Arris Program, in partnership with Obsidian Insurance Group, marks an innovative foray into the excess and surplus commercial property space. This venture exemplifies the industry’s movement of property insurance to the E&S space to deal with rate issues in the admitted markets and insure the growing segment of difficult to cover properties.

Finally, as a preview of more deals to come, reports hint towards the imminent sale of Truist Insurance Holdings, and a significant role for Dan Glaser.  This sale has been rumored for a long time and will likely net good returns for Truist Financial and Stone Point Capital.

Insurtech Investments Point to Transformation

In the insurtech sector, a wave of innovation and capital infusion continues to redefine how insurance products are developed, distributed, and transacted. Recent funding rounds and product launches highlight a concerted effort to address market gaps, enhance technological capabilities, and democratize access to insurance services.

Cake’s securing of $1.3M in pre-seed funding, led by venture capital firm Markd, underlines a growing interest in leveraging technology to simplify the insurance M&A process. Cake’s platform, designed to connect independent agents for buying or selling insurance products, aims to streamline transactions and improve accessibility for agents at various levels. This initiative reflects a broader industry shift towards innovative solutions that cater to the evolving needs of insurance professionals, particularly in overcoming challenges related to liquidity and the aging demographics of principal agents.

Similarly, Buddy’s successful $7M funding round, supported by notable investors including Sequoia Capital and Atypical Ventures, underscores the sector’s potential for growth and innovation. Buddy’s subscription-based model, focusing on accident insurance for outdoor enthusiasts, demonstrates the insurtech’s commitment to filling niche market segments with tailored insurance offerings.

Sure’s launch of Anywhere Insurance represents a significant step forward in liberating the insurance industry from the constraints of incumbent rate service organizations and legacy vendors. By offering a scalable solution for carriers, MGAs, and global brands to launch customizable and ready-to-market insurance products.  Sure is setting a new standard for efficiency and flexibility in insurance service delivery with the introduction of generative AI capabilities.

Results Point to Industry Health

This week’s earnings reports paint a picture of an industry in robust health, adept at navigating fiscal and regulatory changes, managing risk, and pursuing strategic growth. The emphasis on strategic acquisitions, underwriting discipline, and investment income optimization, against a backdrop of economic uncertainties and market volatility, underscores the sector’s resilience and adaptability. As the year unfolds, these themes will likely persist, guiding strategic decisions and shaping the future trajectory of insurance organizations worldwide.

Arch Capital Group’s remarkable increase in net income to $2.3 billion, significantly buoyed by a new tax legislation benefit, reflects the broader industry’s ability to leverage fiscal and regulatory changes to their advantage. The purchase of RMIC Cos., highlight the ongoing consolidation trend, aimed at expanding product portfolios and market reach.

Similarly, AIG’s strategic divestitures, yielding $3.5 billion, and its focused efforts to enhance risk-adjusted returns, underscore a strategic realignment towards more profitable and less volatile segments.

Conversely, Corebridge Financial’s Q4 loss, primarily due to derivative impacts, and Brighthouse Financial’s net loss attributed to market performance impacts on hedges, reflect the challenges faced by the industry, particularly in navigating complex financial instruments and market volatility. These instances underline the need for strategic risk management and the exploration of innovative reinsurance and capital efficiency strategies.

Swiss Re’s substantial growth in net income to $3.2 billion and its 22.3% return on equity in 2023 highlight the industry’s resilience and adept management of underwriting performance and investment income. This is further evidenced by Swiss Re’s P&C reinsurance arm’s significant contribution, driven by disciplined renewals and effective catastrophe claims management.

Finally, Principal Financial Group’s and Trisura’s reports reveal a strategic pivot towards operational efficiency, with Principal focusing on exited businesses’ impact on net loss consideration of a Bermuda entity, indicate a forward-looking approach to seizing growth opportunities.  Trisura emphasizes measured growth and profitable underwriting along with strong combined ratios, and the exploration of new markets and regulatory environments.

Join us as we continue to explore the headlines and news shaping the insurance sector, and stay tuned for more insights on the unfolding narrative of our industry!  Stay productive, stay safe and stay in touch!