Why Product Diversification Into E&S/Specialty Matters: A Q2 Top-Line Analysis

September 21, 2020 by Anuj Jain

Looking at the second-quarter earnings reports of leading insurers, the argument for product diversification has never been stronger. Results are in from this COVID-impacted quarter, and they indicate that the historically high multiples that primary lines-centric carriers paid to break into specialty had some merit. That’s because not all corners of insurance have been impacted in the same way by the pandemic, and the top-line growth in the newly acquired specialty lines has softened the blows felt elsewhere for the insurers that had the foresight to diversify. Executive SummaryOpinion. Anuj Jain, the Carriers Practice Leader at ReSource Pro, makes the case that product diversification can boost top-line growth even in a pandemic-impacted quarter. He examines the second-quarter 2020 results of three multiline carriers that recently acquired commercial and specialty insurance competitors to support his view.

Executive Summary

Opinion. Anuj Jain, the Carriers Practice Leader at ReSource Pro, makes the case that product diversification can boost top-line growth even in a pandemic-impacted quarter. He examines the second-quarter 2020 results of three multiline carriers that recently acquired commercial and specialty insurance competitors to support his view.

Additionally, this quarter is showing historic rate-taking by carriers. A closer examination of where insurers are suffering and where they’re thriving shows resiliency, though not for all players.

On the struggling side, we have small commercial, personal auto and workers compensation. While personal auto has declined due to rebates and policy discounts, workers compensation—which was showing signs of emerging out of a rate reduction environment—saw a slip in payroll as unemployment rates shot up to nearly 15 percent in April. Small commercial is taking a hit as a whole because of these two lines and businesses shrinking or even shuttering in record numbers.