1、November 2022Global Insurance Report 2023:Reimagining life insuranceThe global life insurance industry is facing an inflection point.A fundamental reimagination will usher in significant change.The life insurance chapter of the McKinsey Global Insurance Report 2023 is a collaborative effort by Vivek

2、 Agrawal,Ramnath Balasubramanian,Pierre-Ignace Bernard,Kristin Cummings Cook,Henri de Combles de Nayves,Alex Gestal,and Bernhard Kotanko,representing views from McKinseys Insurance Practice.ContentsiiIntroduction 01Four paramount forces creating opportunities and obstacles for the industry05An indus

3、try at the crossroads13On the horizon:Fundamental reimagination of life insurance business modelIntroductionOver the past decade,our publications have chronicled the increased instability the life insurance and retirement industry has experienced.Theyve also reckoned with the trends that have been c

4、ausing industry players to rethink their operating models,such as digital transformations;the rise of environmental,social,and governance(ESG)concerns;and the shifting economic environment.More important,theyve worked to inspire insurers to consider new avenues for value creation.In February 2022,th

5、e inaugural McKinsey Global Insurance Report offered a comprehensive overview of the challenges and opportunities1“Creating value,finding focus:Global Insurance Report 2022,”McKinsey,February 15,2022.facing the global insurance industry.1 The 2023 report will be released in chapters and builds on th

6、at work with a new level of granularity and precision of recommendations for how insurers can accelerate growth and exceed performance targets.This chapter covers life and retirement,including the major forces at play in the current life insurance industry,several ways insurers have adapted,and oppo

7、rtunities that life insurers and stakeholders can consider going forwardas well as the fundamental implications for their business models as a result.Our publications have worked to inspire insurers to consider new avenues for value creation.iiGlobal Insurance Report 2023:Reimagining life insuranceO

8、ver the past decade,the life and retirement industry has experienced increasing instability.MF3d/Getty ImagesOver the past decade,the life and retirement industry has experienced increasing instability.Four paramount forces will continue to shape the industry globally over the coming decade.1.Growin

9、g awareness of personal risk and uncertain availability of socially funded benefits The number of people over the age of 65 globally is expected to increase from 9.8 percent to 17.0 percentfrom 0.78 billion to 1.67 billionover the next 30 years.Asia is expected to drive about 1Four paramount forces

10、creating opportunities and obstacles for the industry1Global Insurance Report 2023:Reimagining life insurance67 percent of this increase,with China accounting for nearly 25 percent of that total and India making up 20 percent.More citizens are realizing that they are personally responsible for their

11、 future health and retirement costs:advanced economies governments have become more indebted,and government health and retirement programssuch as the United States Social Security program and Japans National Pension Systemare experiencing funding gaps,resulting in a nearly$41 trillion global pension

12、 gap.2 This realization,however,is creating opportunity for insurers in the industry.2.Near-term tailwinds from rising nominal rates,but real rates may remain low for long Nominal interest rates will remain elevated in the foreseeable future as central banks look to get inflation under control.This

13、is in sharp contrast to what we have seen over the past two decades,which have largely consisted of quantitative easing and ultralow nominal rates.In the near term,life insurers may use these tailwinds to passively capture growth opportunities,especially as asset rotations on the investment side hap

14、pen quicker than adjustments on the liability side,which results in higher spread.In the medium term,however,investors return expectations will increase as volatility pushes up nominal risk-free rates and risk premiums,requiring life insurers to deliver a higher ROE to meet shareholder expectations.

15、Furthermore,higher interest rates could also result in deteroriation of credit,resulting in higher delinquencies and ratings migration,which could directly affect investment portfolios.The near-term tailwind of increasing nominal rates is further mitigated by broader macroeconomic uncertainties and

16、increased equity volatility,which influences valuations for public carriers,diminishes consumer confidence,and increases the hedging costs associated with many product lines,such as variable annuities.Despite high 2“The pension gap epidemic,”The Geneva Association,October 2016.3 Augusto de la Torre

17、and Jamele Rigolini,“MIC Forum:The rise of the middle class,”The World Bank,2011.nominal rates,real rates are low and are likely to remain so.The metric that has long been most closely correlated with real long-term rates is the five-year change in the share of the working population in the worlds m

18、ajor economies.Over the past 30 years,that growth rate has decreased and is expected to continue trending downward.3.The growing role of technologyCustomer expectations are increasing when it comes to level of service,including the desire to integrate digital technology with conventional products.As

19、 such,many companies have shifted their business models to increase their adoption of disruptive technologies such as cloud computing and applied AI and have used more agile ways of working,as well as new talent attraction strategies.Considering this(and that insurers are cleaning up complex legacy

20、systems and platforms to invest in the future),even efficient life insurersthose in the top quartile of total costs to gross premiums writtenhave increased their IT spend from 2 percent of gross premiums to 3 percent(a 50 percent jump)within the past four years.4.Rise of Asian economies and the retu

21、rn of geopolitics A new middle class has begun to emerge in Asia and other developing economies.The population in China,India,and Southeast Asia is projected to grow to 1.2 billion people by 2030 and make up nearly 14 percent of the total global population.3 This trend implies that a greater share o

22、f the worlds population may need access to accumulation products,which brings opportunity for accelerated growth in these markets.However,seizing the full potential of these opportunities wont be easy given renewed geopolitical risks and concerns.High growth potential in Asia,combined with a growing

23、 risk of investing across geopolitical fault lines,suggests that insurers must take a nuanced approach to geographic expansion.2Global Insurance Report 2023:Reimagining life insurance Flavio Coelho/Getty ImagesA confluence of factors has deeply affected the industrys performance in recent years.2An

24、industry at the crossroadsThese forces have been affecting industry performance,shifting the sources of value creation and accelerating structural changes.A look at the current dynamics in the industry offers a compelling case for action.Disappointing performance and declining industry relevanceA co

25、nfluence of factors,some in direct control of life insurers and others exogenous,has deeply affected the industrys performance in recent years.Nominal GDP growth has far outpaced premium growth.Life insurers have faced several challenges delivering growth and returns.In the past two decades,economie

26、s grew faster than insurance premiums,indicating insurers havent been growing at the same rate as the economies in which they operate(Exhibit 1).In the United States and Europe,nominal GDP grew at a CAGR of 4 percent over the past 20 years,but premium growth grew at a CAGR of 2 percent.In Asia(exclu

27、ding Japan),economies grew at a CAGR of 10 percent,while premiums grew just 3 percent.5Global Insurance Report 2023:Reimagining life insuranceThe industry has struggled to generate returns in excess of cost of capital.Over the same period,the industry struggled to generate profitable returns after t

28、he cost of capital(Exhibit 2).Insurers have also struggled to change their performance relative to peers:of insurers that were in the bottom quintile of performance,nearly two-thirds remained in the bottom quintile ten years later.Carriers have still not structurally addressed their cost base.Compar

29、ed to other industries,life insurers have still not structurally addressed their cost base.Since 2003,costs as a share of revenues have increased by 23 percent for life insurerscompared to a 5 percent increase for P&C insurerswhile other industries,including asset management,have been able to addres

30、s costs.While these structural costs have been rising for two decades,the imperative to address them may have arrived.Without targeted actions,the combined pressure of inflation and the talent shortage will likely drive up labor costs.While some insurers have announced restructuring efforts over rec

31、ent years to address cost,these programs have not yet reversed the global trend of rising cost ratios.In our experience,some insurers have launched large,sustained programs to achieve productivity improvements of 10 to 20 percent.The most successful programs to date have combined growth initiatives

32、as well as cost-reduction initiatives that have reinvested bottom-line savings to fund profitable growth.However,many insurers find it difficult to predictably manage and execute growth efforts with the same rigor as expense initiatives.Life insurers relevance in capital markets has declined.The lac

33、k of returns after cost of capital,muted growth,high volatility in earnings,opacity of risks and sources of earnings and value,and lack of individual insurer performance mobility have caused the global life insurance industry to gradually lose its relevance with investors,particularly in the public

34、markets.This trend is most apparent in the United States,where the largest US life insurers share of market capitalization relative to other financial-services peers has decreased over the past 35 yearsfrom 40 percent in 1985 to 17 percent in 2005 to only 9 percent in 2020.This is according to McKin

35、sey analysis of data on the top 20 publicly traded life insurers,banks,and asset management and securities brokers in the United States(Exhibit 3).Sources of value shifting The value pools and sources of creation across the life insurance industry are not homogenous.Carriers face choices in products

36、,components of the value chain,and geographies.Huge dispersion in growth hot spots.While overall industry performance has been disappointing,across the globe there are some notable pockets of growth and opportunity.In the United States,products that provide principal protection with some upside base

37、d on market 6Global Insurance Report 2023:Reimagining life insuranceExhibit 1Web Exhibit of Life insurance premium growth vs nominal GDP growth,Indexed,n=1001Data as of August 2022.2Excluding Japan.Source:Federal Reserve Economic Data(FRED);Macrotrends;S&P Capital IQ ProLife insurance premium growth

38、 is lagging nominal GDP growth across the globe.McKinsey&Company20052010 2005200020252010 2015 20202005200020252010 2015 2020140160180US nominal GDP growthUS life insurance premium growth2004%0180European Union nominal GDP growthEuropean life insurance premium growth

39、20000Asia2 nominal GDP growthAsia2 life insurance premium growthUnited StatesEuropeAsia2%4%2%10%x%Average growth rates3%Life insurance premium growth is lagging nominal GDP growth across the globe.7Global Insurance Report 2023:Reimagining life insuranceExhibit 2Web Exhibit of L

40、ife insurance industry performance(200021),returns in excess of equity cost EuropeAsiaUnited States20002000420052006200720082009200001920202021FNote:Return on surplus=return on equity minus cost of equity.Cost of equity=US risk-free rate(10-year treasury b

41、ill)+5%x insurance industry long-term beta(1.1).Infation diferentials,which are derived from Oxford Economics,are also applied for each regions cost of equity.China is used as a proxy for AsiaPacifcs infation diferential.1Forecast 2021 numbers are based on the most recently available data.Source:Oxf

42、ord Economics;McKinsey Global Insurance PoolsAs an industry,life insurance has frequently ofered returns below the cost of equity.McKinsey&CompanyAbove cost of equity returnsBelow cost of equity returns0.24.69.41.63.74.23.90.240.32.81.15.64.55.12.83.02.33.502.93.41.10.57.316.53.73.65.14.56.023.09.92

43、.312.05.38.01.65.43.91.82.82.62.52.23.31.33.34.01.10.91.50.312.10.21.20.12.21.22.82.60.82.22.20.92.91.7As an industry,life insurance has frequently offered returns below the cost of equity.performance(fixed and fixed-indexed annuities and variable universal life,for instance)as well as simple,protec

44、tion-oriented products(such as accident and health products distributed through worksite channels)are expected to grow more than 5 percent between 2021 and 2026(Exhibit 4).Over the same period,market-oriented annuity products where the customer bears most or all of the risk are expected to decline b

45、y more than 5 percent.In Europe,unit-linked products show potential opportunity.The French market saw gross inflows increase by 51 percent between 2017 and 2021,while gross inflows decreased by 4 percent in general accounts.In Asia,hot spots are both geographic and product-specific.Geographically,In

46、dia and China are poised as long-term growth opportunities due to economic growth and demographic trends.In terms of products,Asian insurers have been focusing on addressing both high out-of-pocket expenses from private health insurance and growing retirement needs.Zeroing in on these hot spots of g

47、rowth requires granular strategic thinking.Value creation shifting to investment alpha.As interest rates have declined over the past two decades,the importance of investment alpha as a source of competitive advantage has increased.Despite near-term nominal tailwinds,low-for-long real rates will cont

48、inue this shift toward investment alpha.Returns on conservative investment allocations have plummeted below the cost of holding traditional insurance liabilities,and in an environment in which it is cheap to raise capital,life insurers gain competitive advantage from growing high-yield assets.Howeve

49、r,as insurers allocate to higher-yielding assets,they will have to prioritize risk concerns as they make investment decisions.That entails deliberately assessing their risk tolerance to ensure that their ability to manage those risks is aligned with the investments theyre making.Carriers are now wei

50、ghing the risks and fiscal costs to operate in developing economies.Companies have started to rethink what it means to be a“global insurer.”Historically,life insurers looked toward markets that were similar to theirswhich also tend to be closer geographicallyto expand market share and drive top-line

51、 growth.As technological advancements accelerated the globalization process,insurers began to expand globally,particularly into Asia,to diversify their portfolios and increase valuations.As the economics of the world have changed,insurers are weighing the risks and fiscal costs of operating in sever

52、al regions.Although many developing regions still present attractive growth opportunities,geopolitical risk,unfriendly regulations,and specific consumer demands have made insurers rethink their decision to enter new marketsor even to stay in ones where they already have a footprint.As part of the on

53、going cost-benefit analysis for entering or staying in certain markets,insurers now have to think about their ability to repatriate profits to their home country;assess whether economies of scale can 8Global Insurance Report 2023:Reimagining life insuranceExhibit 3Web Exhibit of Market capitalizatio

54、n of the top 20 companies,%1Top 20 US publicly traded life insurers,banks,and asset managers and securities brokers,based on given years market capitalization.US life insurers have been experiencing declining relevance among investors.McKinsey&Company9586672020%,in$billions=Ass

55、et managementand brokersBanksLife insurers1,6112,37716US life insurers have been experiencing declining relevance among investors.be or have been achieved;determine if valuations are giving sufficient credit for successful entry into these markets;and decide if entering these developing markets alig

56、ns with their overall strategic goals.Big structural changes in motionEntrants and new sources of capital are disrupting and pushing the structural evolution of the sector.Private capitalbacked platforms gaining relevance.The past decade has seen a continuous rise of private capitalbacked platformst

57、ypically fully or partially owned by alternative asset managers,which find the life insurance industry attractive for several reasons.Primarily,theyre enticed by the opportunity to drive improvement in performance and by the potential to access“permanent”capital in the form of a stable pool of liabi

58、lities,which can be deployed into various asset strategies,from traditional fixed income to more structured products or alternatives.4 In turn,they can generate more predictable fee-based earnings streams while reducing the overall fundraising burden.In the United States alone,private capitalbacked

59、platforms account for almost$292 billion in general account reserves,4 For more,see Ramnath Balasubramanian,Alex DAmico,Rajiv Dattani,and Diego Mattone,“Why private equity sees life and annuities as an enticing form of permanent capital,”McKinsey,February 2,2022.making up about 9 percent of the indu

60、stry stock,according to our analysis(Exhibit 5).These platforms also have significant market share in some categories of new business generation:among the leaders within each product line,private capitalbacked platforms accounted for 40 percent of fixed-indexed annuities sales in 2021,up from 7 perc

61、ent in 2011,and 19 percent of fixed-rate deferred annuities sales in 2021,up from zero a decade prior.Structural shift toward more independent,third-party distribution.Distribution has been a source of outsize value creation for insurers that have wielded it successfullythat is,by staying ahead of b

62、oth customer and adviser expectations.Recent years have therefore seen within the distribution function significant innovation and structural shifts that have proven critical to competing with insurtechsabout 40 percent of which are focused on the marketing,sales,and distribution part of the insuran

63、ce value chain.A significant portion of this spending is directed at enhancing the digital tools,analytical capabilities,and technological connectivity that support a seamless end-to-end experience from manufacturer to distributor to customer.9Global Insurance Report 2023:Reimagining life insuranceE

64、xhibit 4Web Exhibit of 2021 sales2$billionsHistorical CAGR201621,%Forward CAGR202126F,%1Percentage points.2Life:annualized new business premium;annuities:frst-year deposits and additions.3Figures are forecast.In the United States,market-oriented life products and spread-based annuities are forecast

65、to experience high growth rates.McKinsey&CompanyIndividual lifeProtection-orientedSpread-basedMarket-sensitive12.54.61.7Core(life,disability,and dental)Supplemental(accident and health)Group annuities10.92.6160.0Spread-basedMarket-sensitive164.087.04 0 p.p.02 p.p.34 p.p.5 p.p.2224+2567 5I

66、ndividual annuitiesGroup or worksiteIn the United States,market-oriented life products and spread-based annuities are forecast to experience high growth rates.In recognition of the power of earning streams from distribution,investors have tended to reward the capital-light earnings generation of pur

67、e-play distributors,such as brokerages,independent marketing organizations,and field marketing organizations.Those players have generated 2.6 times the TSR of life insurance companies since 2010 and currently trade at nearly 2.8 times the price-to-earnings multiple of their life insurance counterpar

68、ts.Beyond continued innovation and the shift in value toward distribution,the industry is also experiencing a structural shift toward more independent distribution.Many companies have moved away from captive or affiliated distribution because of the increased commoditization of many insurance and an

69、nuity products and the increasingly open technology architecture and choice offered by insurance distributors.In the United States,third-party distributors are Exhibit 590 1099AnnuityLifeTotalFixed-indexed annuitiesVariable annuitiesFixed-rate deferred annuitiesGroup annuity200

70、21Web Exhibit of Private capitalbacked US life and annuity reserves,%of industry reservesPrivate capitalbacked share of sales,%Note:201120 data sourced from A.M.Best;2021 estimated using insurance regulatory data sourced from A.M.Best;individual annuity sales data sourced from 2010 and 2020 LIMRA In

71、dividual Annuity Yearbooks;group annuity premium data sourced from A.M.Best.Source:A.M.Best;Life Insurance Marketing and Research Association(LIMRA)In the United States,private capital platforms own about 9 percent of industry reserves and have grown substantially in fxed annuities.McKinsey&CompanyI

72、n the United States,private capital platforms own about 9 percent of industry reserves and have grown substantially in fixed annuities.Beyond continued innovation and the shift in value toward distribution,the industry is also experiencing a structural shift toward more independent distribution.10Gl

73、obal Insurance Report 2023:Reimagining life insuranceincreasingly becoming more dominant,expanding their share of the market from 49 percent in 2010 to a forecasted 55 percent in 2021;conversely,proprietary distribution networks are declining in prevalence,from 30 percent to 26 percent during the sa

74、me time period.In Europe and Asia,we can see a similaralthough smallerincrease in third-party distributors.In the same time frame,Europe increased its market share from 17 percent to 18 percent,and Asia increased its share from 8 percent to 11 percent(Exhibit 6).Within Asia,the share of third-party

75、distribution is still low overall,and select insurers with high-quality,proprietary distribution will continue to see high value creation from this model.Exhibit 611.810.249.054.99.030.226.28.72021F2010Third-party distributionBancassuranceDirectCaptive distribution17.756.918.255.422.43.13.14.423.320

76、21F201011.18.410.539.627.347.751.02021F2010Web Exhibit of Life insurance distribution channels,%United StatesEuropeAsiaNote:Figures may not sum to 100%,because of rounding.1Tied agents and branches.2Independent brokers.3Remote channels,such as mail and internet,as well as other channels,such as reta

77、ilers and worksite marketing.42021 fgures are forecast.Source:McKinsey Global Insurance PoolsThe United States,Europe,and Asia have seen a rise in third-party distribution networks in the past ten years.McKinsey&CompanyThe United States,Europe,and Asia have seen a rise in third-party distribution ne

78、tworks in the past ten years.11Global Insurance Report 2023:Reimagining life insurance Baac3nes/Getty ImagesWhat strategic strengths can insurers depend on to generate growth in the coming turbulence?3On the horizon:Fundamental reimagination of life insurance business modelInsurers will have a dizzy

79、ing number of options available to them in the coming yearsas will investors.In the balance of this report,we detail how insurance companies will shift their priorities in the near future and how different types of insurance models can help determine how best to meet the objectives of their investor

80、s.The question is clear:what strategic strengths can insurers depend on to generate growth in the coming turbulence?13Global Insurance Report 2023:Reimagining life insuranceFour unbundled business models to drive value creationTraditionally,insurers have achieved profit and growth by identifying att

81、ractive products and markets,such as individual protection and annuities,and structuring their end-to-end value chain to support these products and markets.Ownership of most of the value chain was important to simplify operations and maintain control over the end-customer experience.Today,the indust

82、ry is reconsidering this approach to the value chain in two notable ways:product bundling and functional unbundling.When it comes to products,those that meet the needs of the same customer segmentssuch as retirement and wealth and asset management services or group and retail salesare converging,whi

83、ch is pushing insurers into new territory.Some insurers will even go so far as to branch into the health and protection ecosystems if there is demand from their customers.5 Insurers are also expanding and evolving their product shelf,shifting the mix away from traditional and balance sheetheavy prod

84、ucts to capital-light products and combining distribution points to create a simpler,more integrated customer experience.Looking ahead,insurers will increasingly“unbundle”their value chain and focus on sources of distinctive value creation while seeking partnerships or leaving the other parts of the

85、 value chain to those who are advantaged.Unbundling helps uncover value within the integrated business model and focuses on distinctiveness while creating new sources of growth and value.6Four insurance functions will take center stage during this change:product design and underwriting,balance sheet

86、 management,distribution,and technology and administration.Insurers can start by determining how the strengths of their business model map to these four functions(Exhibit 7).Balance sheet specialists,for example,might consider finding a distribution partner,while distribution specialists tend to be

87、best served by partners in product design and underwriting or balance sheet management.Those insurers can then use those strengths to differentiate themselves,achieve profitable growth,and appeal to investors.Distribution specialists.Insurers that pursue this model will have distinctive distribution

88、 capabilities 5 For more,see Mathew Lee,Arielle Pensler,Neha Sahgal,and Matthew Scally,“US workplace benefits:Connecting health,wealth,and wellness,”McKinsey,October 3,2022.6 For more,see Ramnath Balasubramanian,Rajiv Dattani,Asheet Mehta,and Andrew Reich,“Unbundling value:How leading insurers ident

89、ify competitive advantage,”McKinsey,June 9,2022.and privileged customer access and insights.They will focus on advice and distribution of a broad range of insurance,wealth management,and other financial products taking a client-centric,technology-enabled approach.They will have a capital-light model

90、 with little to no product manufacturing and work with a broad range of partners for access to products.This model will be attractive to public and privately owned insurers given the capital-light and fee-income-based earnings streams,which are typically more highly valued by investors.Product manuf

91、acturing and origination specialists.Insurers that pursue this model will have privileged distribution access(proprietary or third-party),strong product development driven by customer insights,and distinctive underwriting capabilities.While they may develop several products of varying capital effici

92、ency,they will retain only the most capital-efficient products,such as simple protection,on their own balance sheets.For more capital-intensive products,they can work with capacity providers via coinsurance,reinsurance,or white-labeling arrangements.Pursuing this model will help convert earnings str

93、eams that are more capital intensive to recurring fee-income earnings streams that are more capital efficient.These insurers could also predominantly seek strong partnerships in investment management while selectively building capabilities in some asset classes.We anticipate many public insurers wil

94、l gravitate toward this model given investor expectations of simpler business models and more stable,predictable,and capital-light earnings streams.Balance sheet specialists.Insurers who pursue this business model will have distinctive risk assessment capabilities and will marry this expertise with

95、their strong balance sheet capacity to absorb various risk types.They will have the leading investment management talent in the insurance industry,with distinctive asset origination capabilitieseither in-house or via relationships with specialist asset managers,at times even acquiring stakes in such

96、 managers,as well.Additionally,they will make deliberate choices about their risk tolerances and marry their investment expertise with leading risk management capabilities.Their distributionwhere they source products and assetswill primarily come from institutional partnerships 14Global Insurance Re

97、port 2023:Reimagining life insurance(such as funding agreements,pension risk transfer,and flow reinsurance)or inorganic sourcing(such as the acquisition and divestiture of legacy blocks).These insurers will also likely fully unbundle their operations and technology functions.This model will largely

98、be relevant for privately held insurers(for example,mutual insurers or private capitalbacked platforms)with access to long-dated,permanent capital sources.Full-service,integrated insurers.Insurers pursuing this model will be few and far between;they will represent the high-water mark in terms of dis

99、tinctive capabilities across the insurance value chain.They may be characterized by strong capital positions,either through scale or through structural capital advantages,and have select sources of distinctiveness across investment management and distributionthough they may still look to unbundle op

100、erations and technology.Many insurers that have the capabilities to be full-service and integrated might consider evaluating each of their business units independently and identifying the models most appropriate for some of their businesses while retaining a full-service or integrated model for othe

101、rs.Imperatives and priorities for life insurersThis shifting industry structure will create new opportunities for where and how life insurers create value,elevating the industrys relevance to consumers and its attractiveness to investors.Insurers will have to chart a course through these shifts and

102、choose their mode of value creation,which will be partly informed by their organizational goals and investor expectations.In the life and retirement industry,six themes Exhibit 7Web Exhibit of Distribution specialists Deep consumer insights Privileged distribution access Client-facing technology Pro

103、duct development driven by customer insights Underwriting capabilities Privileged distribution access Efective partnerships and counterparty management Highly rated balance sheet Robust investment management capabilities Institutional partnerships for accessing“fow”reinsurance Capabilities across en

104、tire value chain Operating margin Organic revenue and earnings growth Free cash fow generation Organic earnings and revenue growth Share of fee income to overall revenue and earnings Free cash fow generation Book value and surplus growth Free cash fow generation Book value and surplus growth Mix of

105、earnings(fee vs spread vs underwriting)Return on equityProduct manufactur-ing and origination specialistsBalance sheet specialistsFull-service or integrated insurers1All life insurers will have to consider the fnancial impact of long-duration targeted improvements(LDTI),which are likely to emphasize

106、 free cash fow as a valuation metric.Unbundled business models provide new pathways for value creation.McKinsey&CompanyDistributionProduct designand underwritingBalance sheetmanagement(capital,investment,and risk)Technology and administrationPrimary sources ofdistinctivenessPrimary valuationmetricsR

107、equired area of distinctivenessTable stakesLess relevantUnbundled business models provide new pathways for value creation.15Global Insurance Report 2023:Reimagining life insurancedominate the investment attraction agenda:top-line or market share growth,diversification(via geographies and products),s

108、ocietal and customer impact,low volatility of results and dividends,ROE,and capital generation.Insurance companies are likely to focus on some combination of these themes based on their ownership type and specific owners.Even within the broader classifications of insurers,however,individual insurers

109、 will have unique situationsand thus unique expectations.Below,we offer a simplified overview of how four broad insurance models could respond to organizational goals and investor expectations by using their strengths to differentiate themselves in the industry.Insurers backed by private capital and

110、 alternative-asset-management players.These players strengths lie in their asset management and liability-restructuring capabilities.These strengths enable them to act as secure providers of capital for insurers divesting their closed books,as well as to expand and diversify their portfolios in a wa

111、y that takes strategic advantage of their asset management capabilities.7 To fulfill their owners expectations,these insurers typically aim for a high ROE(typically in the high teens),combined with consistent growth trajectory.As they look to the future,these insurers will want to proactively develo

112、p new growth vectors,such as more flow-based business beyond pure legacy M&A and international or geographic expansion.They may also continue to strengthen risk management capabilities(given the relatively higher-risk profile of their investment portfolio),further enhance their investment management

113、 capabilities through more dynamic portfolio rebalancing,and develop additional sources of value creation beyond pure investment alpha 7 For more on strategic options for life closed books,see“Running up on runoff:Strategic options for life closed books,”McKinsey,February 10,2021.(for example,by bec

114、oming more ingrained in operations and technology to find value).Mutuals.Mutuals strengths lie in their reputation,high customer loyalty,strong captive distribution networks,low cost of capital,and potential for operational efficiencies at scale.Mutuals typically take a holistic approach to customer

115、 needs and aim to create a consistent,high-quality experience.Mutuals stakeholders can have a range of expectations but could typically prioritize customer and societal impacts and top-line and market share growth.As they look toward the future,mutuals may want to innovate more in their product offe

116、rings to capture growth through distinctive product specialization that better matches customer needs,as well as to transform their distribution and customer engagement capabilities.They also might have to focus on their operational efficiencies to bring down costs and focus on their quality of gove

117、rnance to improve productivity and capital allocation.While not an exclusive consideration for mutuals,those with strong captive-adviser networks will need to adapt to the shifting distribution landscape:they may need to consider strategic partnerships with pure-play distributors,investments in digi

118、tal transformation tools,or efficiencies to support these networks.Larger,more sophisticated mutuals will have an opportunity to develop into full-service,integrated insurers to achieve these objectives,whereas midsize mutuals might need to focus on product origination and knowledge of the customer.

119、Additionally,some mutuals will be ready to leverage their current positioning to act as consolidators,acquiring subscale peers when possible.Four broad insurance models could respond to organizational goals and investor expectations.16Global Insurance Report 2023:Reimagining life insuranceStock-trad

120、ed insurers.Stock-traded insurers strengths lie in their brand awareness,diversified business models,and governance clarity.They aim to deliver on their investors expectations,which typically include regular capital generation and cycle stability,resulting in low volatility in returns and dividends.

121、Going forward,they need to address the issue of where they have unique competitive advantage and can generate capital,such as in certain geographies,lines of business,or parts of the value chain.For example,these insurers may build or partner with others to achieve table stakes investment-management

122、 capabilities,which would help them compete with insurers backed by private capital or alternative-asset-management players and take advantage of opportunities that others are slow to capture.They might also want to find innovative ways to harness their growth opportunities and ensure they are prope

123、rly valued by investors.State-owned insurers.State-owned insurers strengths lie in distribution,low cost of capital,and their ability to make very long-term investments due to their role in society.Most state-owned insurers will typically aim to keep their premiums low while remaining financially st

124、able and to be widely available for the residents of the state.However,as demand for life products changes and becomes more specific for each consumer,these insurers should develop innovative products that are better suited to evolving customer needs.They also need to keep up with the pace of digita

125、l transformation seen in the private sector,all while balancing these large investments with their solvency position.Finally,these insurers may have to address talent attractionfor example,to improve their underwriting capabilities and compete with insurers in the private sector.Life insurers have r

126、esponded to broader trends and industry shifts by reevaluating their traditional business models.The industry will face persistent challenges in the coming years,such as returns after cost of capital and geopolitical risks,as well as new challenges and uncertainty,such as high inflation and volatile

127、 macroeconomic environments.Nonetheless,there are pockets of optimism and opportunity for those who can identify,invest in,and capitalize on their distinctive capabilities to meet the expectations of their owners and stakeholders.Ultimately,a changing industry landscape can allow insurers to overcom

128、e current performance challenges by transforming both where and how they generate value.Copyright 2022 McKinsey&Company.All rights reserved.Vivek Agrawal is a senior partner in McKinseys Minneapolis office;Ramnath Balasubramanian is a senior partner in the New York office,where Alex Gestal is an ass

129、ociate partner;Pierre-Ignace Bernard is a senior partner in the Paris office,where Henri de Combles de Nayves is a partner;Kristin Cummings Cook is a consultant in the Stamford office;and Bernhard Kotanko is a senior partner in the Singapore office.The authors wish to thank Rajiv Dattani,Erik Harris

130、on,Asheet Mehta,Jrg Muhoff,Fritz Nauck,Katrine Pertsovski,and Andrew Reich for their contributions to this report.17Global Insurance Report 2023:Reimagining life insuranceContactsVivek Agrawal Senior partner,MinneapolisVivek_AgrawalMcKUmar BagusPartner,JohannesburgUmar_BagusMcKRamnath Balasubramania

131、nSenior partner,New YorkRamnath_BalasubramanianMcKPierre-Ignace BernardSenior partner,ParisPierre-Ignace_BernardMcKJoo BuenoSenior partner,So PauloJoao_BuenoMcKHenri de Combles de NayvesPartner,ParisHenri_de_Combles_de_NayvesMcKKweilin EllingrudSenior partner,ShanghaiKweilin_EllingrudMcK Bernhard Ko

132、tankoSenior partner,SingaporeBernhard_KotankoMcKJrg MuhoffSenior partner,BerlinJoerg_MusshoffMcKFritz NauckSenior partner,CarolinasFritz_NauckMcKElena PizzocaroPartner,MilanElena_PizzocaroMcKSandra Sancier-SultanSenior partner,ParisSandra_Sancier-SultanMcKSalomon SpakPartner,LimaSalomon_SpakMcKCharlene WuPartner,BeijingCharlene_WuMcK18Global Insurance Report 2023:Reimagining life insurance teekid/Getty ImagesMcKinsey&CompanyNovember 2022Copyright McKinsey&CompanyCover image:Nadezhda Kurbatova/Getty Imageswww.McK McKinsey McKinsey McKinsey