US Finance and Insurance Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 479,320 establishments in the finance and insurance sector engage in the creation, liquidation, and transfer of financial assets and/or support financial transactions. The sector connects savers and investors with borrowers and includes financial intermediaries, which use the funds of savers to make loans or investments. Firms may also act as agents and invest on behalf of others. The infrastructure of financial markets includes systems that provide information, payment, clearing, and settlement services that support and facilitate transactions.
Balancing Risk and Reward
Risk is an integral part of financial markets, and investments can lose some to even all of their value under certain types of conditions.
Government Regulation
Industries in the finance and insurance sector are subject to extensive government regulation at varying levels.
Industry size & Structure
The finance and insurance sector is comprised of 479,320 establishments that employ 6.7 million workers and generate $5.7 trillion in annual revenue, according to government sources.
- The finance and insurance sector represents 8.9% of the nation's Gross Domestic Product (GDP) and employs 5% of the country's workers.
- The sector is somewhat concentrated at the top with the 20 largest firms representing 29% of revenue, but it is fragmented at the bottom.
- In addition to employer establishments, the finance and insurance sector has 755,000 owner-operated establishments with no employees. The subsector with the highest numbers of nonemployer establishments is agencies, brokerages, and other insurance-related activities (54%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The finance and insurance sector shed about 90,000 establishments in 2021, which equals about 16% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 119,000 new establishments, which is equivalent to 21% of existing establishments. As a result, the sector had a growth rate of 5.1%.
- The finance and insurance sector is forecast to grow its employment base by 4.4% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Finance and Insurance Sector Industry Growth
Recent Developments
Aug 18, 2024 - Cyber Insurance Premiums Plateau
- Cyber insurance premiums flattened or decreased in 2023 even as the number of ransomware attacks increased, according to insurance services firm WTW. Premium stabilization is expected to continue in 2024. Experts note, however, that cyber exposure is difficult to manage. “Unlike traditional insurance lines, cyber risk is constantly changing, requiring continuous adaptation and improvement of controls and risk management strategies,” said Michelle Chia, Chief Underwriting Officer for Cyber in the Americas, AXA XL. Premiums increased 50% in 2022, according to Bloomberg.
- US banks have about $517 billion in unrealized losses on their balance sheets, according to the Federal Deposit Insurance Corp. The bank regulator said that the amount has been “unusually high” for nearly 2½ years. Unrealized losses have increased because banks bought government bonds such as Treasurys and mortgage-backed securities when interest rates were low and banks were flush with customers’ deposits during the pandemic, according to The Wall Street Journal. The carrying value of these bonds decreased when the Federal Reserve started to raise rates in 2022. Bonds sell at a discount when rates go up to offer investors higher yields. Most banks shouldn’t have to realize the losses unless they need to sell assets to raise money. That happened in 2023 when Silicon Valley Bank sold billions of dollars of mortgage bonds at a loss primarily to raise money when depositors withdrew a significant portion of their funds. The bank failed days later.
- Financial services stocks and cash are currently popular with US retail investors, according to trading and investing platform eToro. About 54% of investors said they were holding financial services stocks, with technology close behind at 49%. Energy stocks (39%) and communications (36%) followed. Regional banking contagion in 2023, driven by the collapse of Silicon Valley Bank, has left financial-sector stocks such as Charles Schwab, U.S. Bancorp, and PNC Financial Services trading below their pre-crisis levels, enticing value investors. Technology stocks are in demand after the surge in generative artificial intelligence (AI) stocks, led by chipmaker Nvidia. eToro's report indicates, however, that some investors may fear that they have missed the boat, with 76% of US investors reporting holding cash but 22% saying that they would up their bets in technology.
- The finance and insurance sector was among the 10 sectors reporting growth, as measured by the Institute for Supply Management’s Services Purchasing Managers’ Index, in July 2024. US finance and insurance sector employment increased slightly during the first seven months of 2024, according to the US Bureau of Labor Statistics. Corporate profits for financial firms decreased 4.55% year over year but increased 1.3% quarter over quarter during the fourth quarter of 2023, according to the US Bureau of Economic Analysis (BEA).
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