• Why Investor Relations?

    For more than 40 years, the CFA Institute has advocated for efficient capital markets that are ethical, transparent, and provide investor protections. One of the Institute’s guiding principles states: “Investors need complete, accurate, timely and transparent information from securities issuers.”

  • Why InsuranceIR?

    Insurance companies face unique challenges when communicating with investors and InsuranceIR is uniquely suited to help with industry-specific support.

    The primary purpose of this blog is to offer specific ideas on how insurance companies can achieve that objective.

    The supporting pages offer information on InsuranceIR's capabilities and how firm principal Heather J. Wietzel can help your company improve your investor communications.

  • Pages

  • Copyright 2012

Mulling AIFA – It Really Is Time to Differentiate!

The 2012 AIFA conference last week was great – attendance was up and the mood was positive. I thoroughly enjoyed the chance to see investor and corporate friends. And I always appreciate the opportunity to hear so much industry “talk” in such a short period of time. I also will attend the 2012 NYSSA Insurance Conference next week, which may provide more insight.

But since AIFA, I have been mulling what I heard in the formal sessions and in informal conversations (and reading post-conference research from various analysts).

As always, my objective is to identify timely opportunities for companies to augment their investor communications. By providing information that addresses current concerns, companies are helping to make certain that analysts have the right information to assess the potential for book value growth (and valuation). And by clearly addressing topical concerns, companies raise the likelihood that an analyst will be comfortable recommending the stock to portfolio managers.

Differentiating Insurance Operations

In today’s market, I believe the most significant opportunity for insurance company communications is differentiating the potential of the insurance operations, and doing so in ways that have not been necessary for some time.

At this stage, investors see interest rates remaining low for the foreseeable future. As a result, they see any book value growth largely being driven by a higher ROE from insurance operations (risk- or fee-based). (Note that investors continue to expect lower levels of reserve releases going forward, but seem less worried than in the recent past about the potential for out-sized reserve strengthenings.)

But investors do not believe that the “rising tide” of improving rates will benefit the insurance operations of all companies equally – even within discrete lines of business.  Companies that do not clearly differentiate the potential of their business run the risk investors will draw inaccurate conclusions.

Offer Up the Operating Plan

In this context, I recommend insurance companies look at ways to enhance their communications about their operating plan, for example:

  • Measurement of the potential of markets served, whether those markets are defined by product type, geography or industry (an example of which was discussed in a recent post)
  • Clear illustration (and measurement, when possible) of competitive advantages, such as product features, customer service, etc.
  • Quantifiable underwriting analysis to break out pricing advantages
  • Operating analysis that shows the potential for economies of scale and other sources of operating leverage

I would add that these ideas are distinct from a retrospective look at lines of business served, when those lines were entered and performance trends of the past five or more years.

Competitive Intelligence?

And no discussion of messaging on business opportunities would be complete without addressing the concern that there may be competitive risks associated with discussing – even in broad terms – what is essentially the business plan. While this is a real concern – and the success of the business is the most important consideration — in my experience, the risk is often overstated.

When faced with concerns about sensitive information, I recommend that companies:

  • Ask “do our competitors already know this?” and
  • Check with their marketing department for confirmation

I make those suggestions because I have seen first hand how quickly marketing communications and other competitive intelligence moves from one carrier to another via distribution partners.  If competitors already know the information, using it in investor communications is a logical next step. And when material is deemed competitively sensitive, I recommend evaluating how “relative” values or “sample” data might be used to help illustrate a particular topic.

Creative Outreach

Finally, with renewed confidence in an “upside” for the insurance sector, I encourage companies to become more creative in their outreach to investors. This may be the time to arrange field trips, to bring distribution partners to selected meetings or to use web-based capabilities, such as online videos, to showcase aspects of the insurance operations.

InsuranceIR offers strategic consulting and messaging support to insurance company clients.  I would be pleased to discuss how these ideas could be implemented to meet your company’s needs, at your convenience.

“Year-end” is Winding Down … Now for AIFA

I am finding it almost impossible to believe that a year has gone by and that AIFA’s (Association of Insurance Financial Analysts) 2012 annual conference is just a week away.

This conference is one of my favorite “working” events.  So many of my investor and corporate friends attend and we can catch up in a less formal setting (hopefully enjoying a bit of Florida warmth).

In addition to the social aspects, the formal portions of the conference include panel discussions on the variety of topics that insurance-sector investors find important — investments, accounting changes, M&A, rating agency views and business strategies for different property casualty and life insurance business areas.

My experience has been that panel member commentary and investor questions at the AIFA conference often give new insights that can help shape the direction of a quality investor communications effort over the coming months.

I hope to see you there!

Before I close, I also want to draw your attention to two new pages:

These provide details on two areas where InsuranceIR can help insurance companies enhance their investor communications efforts.  I would welcome the opportunity to talk with you about how these (or InsuranceIR’s other services) might be appropriate for your company’s situation.

And Now For AIFA

After almost six weeks of earnings reports and conference calls, I suspect insurance investors are looking forward to AIFA’s (Association of Insurance Financial Analysts) upcoming Annual Conference as much as I am.  The conference begins Sunday night and runs through Wednesday morning.

I’m looking forward to attending — partly because it should be warmer in Florida but more important — because it will be a great opportunity to catch up with investor and corporate friends in a less formal setting.

I’m also looking forward to listening to the panel discussions (a new format this year) that will focus on different facets of the insurance industry.  Presenter commentary and investor questions may give new insights that can help shape the direction of investor communications over the coming months.

I hope to see you there!

Effectively Using a “Timeline” Slide

Over the next week or two, I plan to post ideas on ways insurance companies could strengthen their investor presentations.

To start, here’s an idea on making best use of timeline slides. A significant number of AIFA and NYSSA presenters included a timeline in their deck to illustrate the major events that built their company.

As this mock-up shows, companies can make their story more compelling by linking the events to a measure of the value created.

In addition, the headline could capture the strategic theme of the growth, e.g., diversification.

What This Slide Is Supposed To Show …

I’m still reviewing presentation handouts from AIFA, looking for ideas on how companies can best tell their stories.

The process is reminding me that all too often the best information is hidden behind a comment that begins, now “what this slide is supposed to show” is …

If you find yourself with that line in the remarks for your investor presentation, you probably have a slide in the deck that has great information on a complex topic. But it is a slide that is not gaining you the value it deserves.

To resolve this problem, consider supplementing the work of your communications team on the presentation with input from your marketing or sales group. Those individuals are communicators who know your company (from a slightly different perspective). Asking them to look at your investor presentation with you once or twice a year can give new insight to help you effectively shape these complex points.

AIFA and the Economy

It should come as no surprise that the outlook for the economy was top of mind at the AIFA conference.

I heard a number of investors ask open-ended questions aimed at assessing management’s overall level of optimism about 2010 and beyond, which I view as a good sign. Those questions were looking for insight into both insurance operations and the investment portfolio.

On the insurance front, questions about the economy’s effect on pricing and exposures are sure to continue. Here are a few other topic areas that may generate questions in the coming months:

  • Inflation trends, specifically related to setting and evaluating reserves.
  • Relationship of the “side effects” of economic weakness to potential loss trends. For example:

Effect on frequency of deferred maintenance by policyholders or

Effect on severity as the “less experienced” return to the workforce.

  • Underwriter compensation, which leads to two very different follow-up questions:

How underwriting discipline is monitored or

How a company retains underwriters when their compensation drops because of the formula used.

Beyond the economy, discussions at AIFA confirmed that investors are looking at the potential risks of the changing judicial and tort environment. I looked at the communication implications of tort (un)reform after the NYSSA Insurance Conference in February.

I hope these ideas are helpful. I will be adding detailed posts on a few other topics in the next several days.

Back from AIFA

The AIFA conference is an impressive event that I thoroughly enjoyed again this year.

The presentations cover a vast array of topics relevant to insurance companies and industry investors. I’m sifting through the information from the investor relations perspective and expect to post a variety of thoughts in the coming days.

But there is one recommendation I wanted to make immediately:
Insurance company interim quarter earnings releases/calls should happen in conjunction with the filing of the associated 10-Q.

Putting all the materials out at one time lets a company appropriately focus attention on key strategic messages while meeting investor needs for the necessary details that support results. (Companies also can help by making Schedule D and Schedule P data available at the same time.)

I believe this tactic will be even more appreciated by investors as the accounting grows even more complex, e.g., the potential changes in fair value reporting under consideration by the FASB).