Second-Quarter Middle Market Indicator Reveals Increased Perception of Risk, Dips in Revenue and Employment Growth
On August 25, 2020, Chubb and the National Center for the Middle Market released the second-quarter Middle Market Indicator (MMI) report, indicating significant challenges faced by middle market companies amid the COVID-19 pandemic. The report revealed a sharp decline in economic confidence, with only 38% of executives reporting revenue growth in Q2, down from 73% in Q4 2019. Employment growth also fell to 24% from 48%, marking a worrying trend. Concerns about economic volatility and cybersecurity surged, underscoring the heightened risks in the current business landscape.
- Middle market companies fared better than the broader market, with year-over-year growth at -3.7% compared to the S&P 500's -13.9%.
- Executives projected 2% revenue growth over the next 12 months, indicating some optimism.
- Revenue growth dropped from 73% in Q4 2019 to 38% in Q2 2020.
- Employment growth declined from 48% to 24%, reflecting a significant drop in hiring confidence.
- Economic confidence fell from 83% to 57%, highlighting increased uncertainty.
WHITEHOUSE STATION, N.J., Aug. 25, 2020 /PRNewswire/ -- Chubb and the National Center for the Middle Market (NCMM), housed at The Ohio State University Fisher College of Business, announced results from its second-quarter Middle Market Indicator (MMI) report, within which there is a special segment on the impact of COVID-19. Findings reveal the realities that middle market companies are facing due to the pandemic, with decreased economic confidence, revenue and employment growth; and an increased perception of risk—particularly regarding volatility in the business environment.
Following an optimistic fourth quarter in 2019, revenue and employment growth declined sharply in the second-quarter survey. Seventy three percent of company executives polled reported revenue growth in the fourth-quarter, while only 38 percent reported revenue growth in the second-quarter. Similarly, employment growth decreased from 48 percent reporting growth in Q4 to 24 percent reporting growth in Q2, and economic confidence dropped from 83 percent to 57 percent over the same period.
Perception of risk among those surveyed for the MMI report, which is highlighted within Chubb's Market Dynamics Outlook summary, increased both for their company and within their industry from the previous survey period. Top concerns ranked as extremely or very important among executives polled included: state of the economy as it relates to growth (52 percent—up from 34 percent from the fourth-quarter), state of the economy as it relates to the cost of doing business (49 percent—up from 36 percent), general increase in business environment volatility (40 percent—up from 28 percent), and cyber security (40 percent—down from 43 percent), followed closely by catastrophic incidents (38 percent—up from 18 percent).
"The second-quarter MMI report is a clear indicator that the pandemic is impacting the middle market in terms of decreased economic confidence and increased perception of risk," said Ben Rockwell, Division President, Chubb Middle Market. "Facing subdued revenues and a prolonged business recovery from the pandemic means that middle market companies have little room to take chances in a potentially riskier business environment."
In a complementary document, COVID-19 and the Middle Market, Chubb examines some of the key exposures companies are facing, and provides tools and insights to help agents and brokers work with businesses to assess their changing risk profiles and offer opportunities to mitigate and transfer risk. Agents and brokers can leverage these tools—including suggested conversation-starters—to help their clients manage through the myriad of risks presented by this challenging pandemic.
"As part of this quarter's survey, we included questions to assess the impact COVID-19 is having on their operations and business outlook—comparing findings to both the previous quarter's survey and the COVID-19 pulse poll conducted in March," said Thomas A. Stewart, Executive Director of NCMM. "If there's a bright side to this news, it's that the middle market appears to have endured the pandemic's first punches better than other sectors."
Survey findings reveal that middle market businesses appear to be faring better than the market as a whole. According to the MMI, year-over-year growth fell to -3.7 percent while, at the same time, the S&P 500 reported a -13.9 percent revenue growth. And middle market executives project a two percent revenue growth over the next 12 months.
"While that represents the lowest growth forecast on record, it may mean these companies will, again, show the way forward once the pandemic comes under control," said Rockwell.
Issued quarterly, the MMI explores current and emerging macro trends across the middle market, measuring past and predicted revenue growth, employment growth, economic confidence levels and business investment, along with their perception of risk.
Additional tools and insights for agents and insureds can be found by accessing Chubb's Commercial Agent Resource Center.
About the Middle Market Indicator
Created and managed by the NCMM, the MMI surveys 1,000 C-suite middle market company executives across all industries on key indicators of past and future performance in revenues, employment and allocation of cash, reporting on economic confidence – locally, nationally and globally; identifies key business challenge areas; and measures how these are changing over time. The quarterly survey is designed to accurately reflect the nearly 200,000 U.S. businesses with revenues between
About the National Center for the Middle Market (NCMM)
The National Center for the Middle Market is a collaboration between The Ohio State University Fisher College of Business and Chubb. It exists for a single purpose: to ensure that the vitality and robustness of Middle Market companies are fully realized as fundamental to our nation's economic outlook and prosperity. The Center is the leading source of knowledge, leadership, and innovative research on the middle market economy, providing critical data analysis, insights, and perspectives for companies, policymakers and other key stakeholders to help accelerate growth, increase competitiveness and create jobs in this sector.
Housed at The Ohio State University Fisher College of Business, the National Center for the Middle Market is the first center of its kind in the nation. The Center enthusiastically serves middle market firms, students, academic researchers, policy makers, the media and other key stakeholders with interests in the health and well-being of the middle market. The Center is fully committed to funding and distributing the most credible open-sourced research, dynamically creating new knowledge, providing programs that drive value for middle market companies, and offering a well-informed outlook on the health and future of the middle market via the Middle Market Indicator.
About Chubb
With operations in 54 countries and territories, Chubb provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. As an underwriting company, we assess, assume and manage risk with insight and discipline. We service and pay our claims fairly. The company is also defined by its extensive product and service offerings, broad distribution capabilities, exceptional financial strength and local operations globally. Parent company Chubb Limited is listed on the New York Stock Exchange (NYSE: CB) and is a component of the S&P 500 index. Chubb maintains executive offices in Zurich, New York, London, Paris and other locations, and employs approximately 33,000 people worldwide.
Additional information can be found at: www.chubb.com.
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