10 Jul 2020
Posted in Business Fundamentals
Top 20 insurance companies dwarfed other sectors in 2019 with 18.2% revenue and 123.8% profit growth YoY, says GlobalData
The insurance sector led the way in terms of revenue and profitability growth in 2019, achieving a respective 18.2% and 123% rise year-on-year (YoY). Supported by growing demand for insurance products from the Asian markets, and overall increased demand for property/casualty insurance products, these gains helped the industry lead over other sectors such as retail, oil and gas, medical, pharma and construction, according to GlobalData, a leading data and analytics company.
Anindya Biswas, Company Profiles Analyst at GlobalData, comments: “An increase in the profitability of companies such as Berkshire Hathaway, AIA Group, China Life Insurance, Cigna Corp, China Pacific Insurance and AIG contributed significantly to the sector’s overall profit growth. Cigna Corp maintained a strong profitability due the integration of Express Scripts in December 2018, whereas improvement in the underwriting profitability in its General Insurance business helped AIG remain profitable. A significant contribution towards the revenue in the sector was made by Prudential, whose positive investment returns helped the sector achieve a growth in revenue by 18.2%.”
Retail was another standout performer as it witnessed double-digit growth in revenue and profitability.
Biswas continues: “The rise in the retail sector was spurred by increased revenue from retailers such as Amazon, which saw an upsurge in its domestic and international income supported by increment in its sales via its third-party resellers and growth in income from advertising. Chinese e-retailer, Alibaba, reported a positive revenue growth of 35.3%, mainly driven by efficient customer management, higher income through the company’s in-house digital retail inventory management platform, an increased customer base and growth in the usage of cloud computing in the company’s business lines.
“Furthermore, due to rising demands of electronics and home appliances, the Chinese retailer JD.com posted a positive revenue growth rate in the year. Impressive performance from the leading players helped the retail sector in maintaining a steady positive growth both in terms of revenue and profitability.”
The medical and pharma sectors saw a double-digit surge in their yearly net income growth. Mergers and acquisitions (M&As), innovative medical practices and products, and increasing usage of wearable tech devices drove the medical devices sector. Notable M&As in the sector include the acquisition of Scholly Fiberoptic by Intuitive Surgical and the acquisition of Cephea Valve tech by Abbott, which helped these companies post strong revenue growth and stay ahead of their peers.
Biswas continues: “To benefit from such a growth-conducive environment, M&As were also on the rise, which was witnessed among the top 20 players of the pharma sector. Companies such as Bristol-Myers Squibb, Abbvie, Pfizer and GSK made key acquisitions within the pharma sector, which contributed to their positive revenue and net income growth in 2019.”
Meanwhile, the top 20 construction contractors were dominated by players from Asia-Pacific, particularly from China and Japan. A rise in the demand for affordable housing in public and private sectors accompanied by an increase in the aging population that spurred the construction of newer healthcare facilities, kept the growth momentum steady for the construction sector in China. The Tokyo Summer Olympics is one of the major drivers responsible for fostering the growth in Japan’s construction industry.
On the other hand, the top 20 companies in consumer, mining and oil and gas sectors reflected a dip in their annual profit from the previous year. The oil and gas sector remained the sole sector that reported decline in both revenue and profitability, which was largely due to decline in the performance of European and US majors such as Exxon, Royal Dutch, Chevron and Total.
Biswas adds: “Increasing use of hybrid technologies; a rise in US shale oil production facilities; supply growth in non-OPEC countries such as Brazil, Guyana, Canada and Norway; falling capacity of the OPEC oil producers; and rising importance of petrochemical productions were some of the factors that shaped the oil and gas sector in 2019.
“Sectors such as mining suffered a setback in the year due to persistent trade tensions between the US and China leading to weaker prices in multiple industry metals, which was further aggravated by multiple M&As in the gold sector that shifted the exploration priorities of companies such as Barrick Gold; while the consumer products sector has been reeling under the uncertainty of Brexit and faltering global trades.”