P&C Insurers Say Capital Utilization Is Top Priority
07 Ottobre 2014 - 3:51PM
Business Wire
ORSA and TRIA also identified as hot topics in the P&C
industry
Chief financial officers (CFOs) from North American property
& casualty (P&C) insurance companies identified capital
utilization as their top business priority, according to a new
P&C insurance CFO survey conducted by global professional
services company Towers Watson (NYSE, NASDAQ: TW). The CFOs cited
preparing for the Own Risk and Solvency Assessment (ORSA)
requirements and monitoring progress toward the renewal of the U.S.
Terrorism Risk Insurance Act (TRIA) as their next highest
priorities.
“These are issues with deep repercussions for individual
companies and the market. The fact that they are the leading hot
topics for P&C CFOs is not surprising,” said Alejandra Nolibos,
director in Towers Watson’s P&C business.
Survey participants expressed contrasting viewpoints with regard
to capital utilization over the next one to two years. Their own
companies favor internal investments, looking to build or
strengthen internal capabilities. At the same time, they see the
broader industry leaning toward external capital investments
consistent with the search for growth, both organic and
inorganic.
Over half (54%) of the respondents cited mergers and
acquisitions (M&As) as the most likely use of capital for the
broader industry, while 34% noted expansion into new segments and
geographies. However, only 11% said their own companies would
utilize capital for M&A transactions, and just 20% would use it
for business expansion. Respondents said their companies were far
more likely to deploy capital for internal investments such as core
data systems and infrastructure (49%), data and analytics (40%),
new product development (31%), and building talent and skills
within the organization (31%). While these investments in the
business were the top choices, approximately 30% of CFOs also
anticipate returning capital to owners through dividends or
buybacks.
“CFOs’ notion that the market will invest in M&As may
reflect recent activity in that space, an improving economy and the
capital position of the industry,” said Nolibos. “As regards their
own organizations, the expected use of capital speaks to an
increasingly competitive and sophisticated market where maintaining
and upgrading operations, and the development of new products and
ventures, are keys to success. And while this points to companies
seeing opportunities in the market in the short and long term, many
still anticipate share buybacks or dividends, which may indicate
lower expectations for return on equity.”
While all respondents identified capital utilization issues as
important, strong majorities identified the ORSA (86%) and TRIA
(80%) as important to their companies.
Despite the high priority CFOs place on the ORSA and capital
management, only 26% indicated their companies will invest in
internal risk management and capital utilization capabilities in
the next one to two years. “This relatively low ranking is somewhat
surprising. Effective risk management is inextricably linked to
informed capital utilization decisions and a strong ORSA process,”
said Nolibos.
In relation to TRIA, over 70% of respondents believe nonrenewal
or material reduction to the act would have a minor or no impact on
their organization, and none expect a severe impact. “The nature of
the responses regarding TRIA indicates CFOs are paying close
attention to the federal government’s progress on reauthorization,
but they don’t see the existence of the federal backstop as vital
to their business objectives,” said Nolibos. “This may reflect an
industry on its way to implementing risk management practices
through which some extreme risks are seen as manageable.”
About the Survey Program
Towers Watson’s seventh North American P&C CFO Survey
included 35 CFO participants, spanning carriers in commercial lines
(31%), personal and commercial insurance (28%), and P&C
insurance and reinsurance (20%), including stock (57%) and mutual
(37%) companies. Thirty-one percent have core operations in the
U.S.; 14% operate locally, and 20% are multinational or global.
Twenty-seven percent had total direct written P&C insurance
premiums for 2013 between $100 million and $500 million, while 7%
had premiums over $5 billion.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. The company offers consulting, technology and solutions
in the areas of benefits, talent management, rewards, and risk and
capital management. Towers Watson has more than 14,000 associates
around the world and is located on the web at towerswatson.com.
Towers WatsonJosh Wozman, +1
703-258-7670josh.wozman@towerswatson.comorBinoli Savani, +1
703-258-7648binoli.savani@towerswatson.com
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