This paper studies the impact of internal and external factors on the profitability and financial strength of insurance groups across the European Union, focusing on the effect of the European sovereign debt crisis and the Solvency II Directive, which has not been addressed by the literature. The findings reveal that the efficiency of accounts receivable management and the state of the economy have a significant positive impact, whereas the underwriting risk and size have a significant negative impact on profitability and financial strength. Furthermore, long-term interest rates exert a significant positive influence, whereas the purchase of reinsurance, size of the domestic market, market structure, and inflation exert a significant negative influence on profitability. The European sovereign debt crisis has a significant negative impact on profitability and a positive but insignificant impact on financial strength. Solvency II has no statistically significant impact either on profitability or on financial strength. This paper contributes to the literature through the identification of the impact of the European sovereign debt crisis and Solvency II, which has not been depicted so far, as well as the impact of a series of internal and external factors on profitability and, for the first time, on financial strength.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11294-023-09873-y.