Constant annual growth rate that, applied under compound interest, transforms an initial value into a final value over n years.
CAGR (Compound Annual Growth Rate) is the hypothetical uniform annual growth rate that, applied under compound interest over n years, transforms initial value V0 into final value Vn. Formula: CAGR = (Vn / V0)^(1/n) − 1. It smooths intermediate fluctuations and gives a synthetic view of long-period performance. In insurance, it is used to analyze premium growth (GWP CAGR), losses, ratios or assets. A premium CAGR of 8% over 5 years implies a doubling in 9 years (rule of 72). CAGR can only be calculated if initial and final values have the same sign.
2019 GWP: 100 M EUR. 2024 GWP: 140 M EUR. CAGR = (140/100)^(1/5) − 1 = 1.4^0.2 − 1 ≈ 6.96% per year.
compound annual growth rate, taux de croissance annualisé, TCAC, taux composé, annualised growth rate