We’re entering another quarterly reporting season and it continues to feel as if every glimmer of good news for the property casualty insurance market is offset by something in the bad news column.
So, (from an investor relations perspective) what’s an insurance company to do?
In my opinion (and there’s research to support this view), the greatest potential upside lies in doing even more to educate investors about your company’s strategy. Better communication isn’t a way to mask weak performance. But better communication can reduce uncertainty and bolster management credibility, arguably a company’s most important intangible asset (see “Be Forthright to Counter Prevailing Mood” for more on this concept).
To get the “educating” ball rolling, here are some ideas for consideration:
- Premiums – Not all geographies and industries are equal in this economy. Help investors understand your company’s business by distinguishing its markets. Consider highlighting lower-than-average unemployment in your company’s key states or relevant trends in targeted industries. This post gives a few other ideas.
- Inflation/deflation — Be ready for questions about inflation/deflation. Be prepared to talk both about how these trends might be affecting reserving for current losses and whether a change in your company’s inflation expectations has been a driver of reserve releases for recent accident years. (Also, be set to discuss the potential effect on your company’s investment results.)
- Judicial climate – Six months ago, I talked about medical malpractice carriers being asked about “slippage” of tort reform in various states. The questions focused on pressure on awards and settlements (longer term) and defense costs (shorter term). In recent months, I’ve started to hear similar questions asked of insurers with broader commercial liability exposure.
- Reserves – This is another topic I’ve addressed before, but insurance investors need to understand reserve trends to be confident in a company’s strategy. This April post offered a summary of potential disclosures.
- Muni portfolio – Investors are still sensitive to the default risk of some municipalities. Last quarter, I talked about data companies might consider making available to investors to mitigate their concerns.
These ideas offer a starting place for most property casualty insurance companies. I would welcome the opportunity to discuss specifics ways in which your company could help investors better understand its business strategy.