I kicked off September with a trip to New York to attend an investor conference, where I had the opportunity to listen to a number of insurance company presentations. I also visited with several other analysts. (It’s always good to see industry and investor friends, thanks to all!)
Attendance at the conference was excellent, despite the holiday week timing, which is good news for the industry. But I saw continued uncertainty, with investors appearing even more pessimistic than two months ago about the near-term outlook for the industry as a whole. For example, surprisingly few managements were asked about the pricing environment. And when asked, the questions seemed pro forma, as if investors didn’t really expect to hear anything new or upbeat about commercial or E&S pricing trends (the overall view of personal lines remains a bit more favorable).
That said, the continued interest in insurance stocks argues that all is not lost and that this is the time to step up outreach to investors, not cut back. (Three out of four U.S. property casualty insurance companies are trading at a discount to book value, one can argue that some must have favorable prospects.)
There is no one-size-fits-all solution to translate investor attention to action in this market (making it difficult to make recommendations here that are appropriate to all situations). But investor needs generally are best met by clearly and credibly articulating the business strategies that will differentiate a company’s business in years to come. To meet that need, I recommend shaping communications around the strategic plan (appropriately modified for competitively sensitive information), supported by the metrics used to measure the success of the initiatives.
The need for this type of forward-looking communications exposes a message weakness for many insurance companies. Managements often seem most comfortable explaining how they have gotten the company to where it is today, describing successes in very different insurance and investment environments. Investors may listen politely, but that focus is not the best use of their time, or management’s.