As Fitch noted earlier this week, one provision of Dodd-Frank instructs the SEC to remove the exemption from Regulation FD for “entities whose primary business is the issuance of credit ratings” within 90 days of the “enactment of this sub-title” (SEC. 939B).
Insurance companies should be concerned about this potential change for important business reasons, but there also are investor relations implications. (Because of the role of financial strength ratings, insurance companies interact with rating agencies at least as often as they do with sell-side analysts actively following the company. The depth of information provided to the rating agencies is substantially greater.)
Investor relations often is integral to monitoring Reg FD compliance with investor audiences but does not necessarily have a primary role in ratings agency communications for insurance companies.
I’m sure legal groups will be talking about this provision soon (in great detail). In the meantime, here are a few considerations from the investor relations viewpoint.
- Will companies want IR to sit in on conversations/meetings with rating agency representatives to monitor for unintentional disclosures?
- If management cannot make “alert” calls to ratings agency analysts prior to key announcements, who will devote time to those calls in the hours after the release is issued?
- What role does IR take in the development and review of the lengthy (100+ slides) decks used for rating agency presentations and of the responses to various questionnaires and other rating agency inquiries?
I am very interested in any thoughts my readers might have on this topic.