Understanding the investment fundamentals of the insurance sector.

Joseph Wong    Alan Lok, CFA, Eunice Chu, ACCA, Guruprasad Jambunathan
15 Apr 2019
Categories: Industry/Sector Analysis, General Market Analysis, Fundamental Analysis, Investor Education

Country or region: Asia Pacific (Overall)

A part of the series "Sector analysis: A framework for investors", created to help investors undertake proper due diligence on insurance companies, a well-established sector which nevertheless does not escape forces of technological disruption.

This publication qualifies for 1.0 CE credits under the guidelines of the CFA Institute Continuing Education Program.
We encourage CFA Institute members to login to the CE tracking tool to self-document these credits.  



The key to a company’s success depends on how well it executes its business model. This calls for optimising the allocation of limited resources to generate sustainable cash flows, for investing in new products, technologies, and services in responding to the wider competitive landscape or societal changes and mega trends, as well as for devising appropriate responses in the face of an evolving macroeconomic, regulatory, and political environment.  

Different industries often require very different business models; and even within the same industry, the model that does add value to the business may vary somewhat from company to company.  

To help investors undertake proper due diligence on a company, we have generated a framework of analysis designed to tease out the following: (1) whether the pertinent factors favour the firm in question; and (2) whether management is effective in executing its business model or value-generating strategies, while responding appropriately to its external environment.

This framework is customised to specific sectors and incorporates interviews with professionals within those sectors. 

Insurance is a curious sector. In years gone by, it was regarded as something of a cash cow, with the likes of Warren Buffett treating the float as a source of money to be invested elsewhere. Insurance companies were also seen as sclerotic, with time-consuming processes that often placed the customer last. It’s not because these firms didn’t care. Instead, the characterisation reflected an
ingrained culture that didn’t quite know how to change. 

To read more, download the full sector analysis for the Insurance Sector with accompanying question bank.

Date of original publication:


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Reader Comments

Soham Das
Apr 25 2019
It would have been interesting to supplement this framework with a live case study of a real insurance company

Md Mahabub Alam
Apr 07 2019
Great content


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