My trips to New York and Chicago over the past two weeks included visits with four industry sell-side analysts (thanks to each for their time).
I also attended Cagney Network’s 2010 Insurance Round Table along with buy-side investors and others with industry or consulting roles.
As I look through my notes, I see only one common theme — uncertainty.
Regardless of background, no one seems to have confidence in the economic outlook. Those in the financial markets seem the least optimistic. For the property casualty insurance industry, most see intermittent positives in some business lines. With a few interesting exceptions, most also see some event that dramatically reduces capital as the only way to end the current soft market. (And no one seriously wants an event of that magnitude because of the human cost!)
Realistically, there are only a handful of companies that might be able to individually reverse the current mood. I see many of the remainder very tempted to “fly below the radar” until the mood changes.
My advice — don’t. There is no advantage in letting your company become one more source of uncertainty, even if the going is tough. Better communications isn’t a way to mask weak performance. But better communications can be used strategically to reduce uncertainty and to bolster management credibility, arguably a company’s most important intangible asset. For those reasons, I recommend that companies:
- Become more transparent – Give new insights into your long-term business strategies and decision-making
- Add to your disclosures – Provide more detail (and data) on the drivers of your current results and sources of future opportunity
- Make management more available – Let more investors hear directly from your leaders
- Share your vision – Help investors see how the company might perform under best-case and worst-case scenarios and how it is differentiated in the market