• 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.

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  • Copyright 2012
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Philosophy vs. Data (times three)

In my view, one of the most intriguing aspects of last week’s NYSSA Insurance Conference was hearing the managements of three different companies (out of 16) give largely “philosophical” rather than “data-driven” presentations. I believe insurance-sector investor communications teams should evaluate whether this approach could be appropriate for their situation.

Alphabetically, with links to the webcasts of each company’s NYSSA presentation, I am referring to:

(Note: InsuranceIR does not have a business relationship with any of these companies.)

While there were distinct differences between the three presentations, they shared a number of common attributes:

  • Speaking style was conversational. As a listener, I felt that narratives were being shared about how these managements view their business and what they deem to be integral to the success of those businesses.
  • Very little of the time was spent on a detailed review of historic performance or “to-the-decimal” business metrics. As a listener, I appreciated that the speakers were not reciting information readily available in print or electronic materials (although data was used appropriately to support key contentions).
  • Projected slides were heavy on concept and light on “detail.” As a viewer, I was not distracted by cluttered slides projecting complex data in type too small to be read.
  • The audience was paying attention. During these presentations, the iPhones, iPads and Blackberries had not disappeared, but I felt that a higher-than-normal portion of the audience kept their eyes on the speakers and off their “devices.”

Full Disclosure Not Misdirection

I believe investors would agree that the success of this presentation style is largely predicated on another important attribute – consistent availability of complete, transparent disclosures of the details otherwise un-discussed in a “philosophical” presentation.

Based on a brief review of the companies’ respective websites, IPCC, PRA and RLI all appear to provide financial supplements and/or supporting presentation handouts that offer operating metrics and other financial details in sufficient depth to meet investor needs, and they appear to provide that data routinely.

Considering the Opportunity to Adapt the Investor Presentation

Investors across all sectors appreciate managements that are willing to devote time to outreach. But accessibility alone only goes so far. In my experience, investors vastly prefer conference presentations that go beyond “reviewing the business,” and instead help them assess a company’s management team and give them insight into:

  • What sets a company apart
  • Its competitive advantages
  • Its operating strategies
  • Management’s view of the company’s potential

To accomplish these objectives, companies may need to rethink the approach used for their presentations. I believe the philosophy-based presentations given by IPCC, PRA and RLI at the NYSSA Insurance Conference were compelling examples of one viable alternative style.

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The Timeline Slide … in action

I’m now back from the NYSSA Insurance Conference. It was another great opportunity to see friends. It also proved to be a very interesting conference from an investor relations perspective, for a number of different reasons.

I expect to do a couple of posts on those topics, and I wanted to start by highlighting an effective (although complex) slide used by Argo Group (NASDAQ:AGII) in their presentation.

As background, generally the various permutations of “timeline” slides provide only a look at events in a company’s history, giving little insight into the benefits or implications of those events. After the NYSSA Conference two years ago, I did a post looking at how an insurance company might present a timeline that explained their history in a way that offered greater value to investors.

At this year’s conference, in real time, Argo used a slide very similar to the suggestion made in that post. (Note that InsuranceIR does not have a business relationship with Argo Group. I also do not know if they were aware of the earlier post.)  In any case, below is a copy of the slide used (click on the slide to link to the full presentation from the company’s website).

The graph and accompanying details provided by Argo gives investors useful information on the changes that have occurred in their business as they have made strategic decisions.  Kudos!

Elegant Solution

Yes, I’m back. More on that in a moment.

But first I wanted to observe that last week, Allstate Insurance* (NYSE:ALL) pre-announced catastrophe losses for April storms. In that release, the company also noted:

“In the future, Allstate plans to announce monthly and quarter-to-date estimates for catastrophe losses when monthly catastrophe losses are estimated to exceed $150 million. These announcements will inform investors who have a strong interest in the company’s catastrophe loss estimates when there is significant severity or frequency of catastrophe events. Over the past 10 years, Allstate had catastrophe losses exceeding $150 million in about 30 percent of months.”

I’ve talked about pre-releases in the past, for example in “To Pre-release or Not … That is the Question.

Pre-releases serve several very important roles, not the least of which is helping companies focus their communications on business strategy by reducing investor uncertainty and minimizing distractions. Allstate’s “line in the sand” solution to the question of “when” a pre-release is appropriate is elegant in its simplicity. In my view it stands as a useful example of how a company might address this disclosure conundrum.

InsuranceIR Update

Without boring you with the details, the past few months have been complicated and busy! While nothing earth shattering, dangerous or untoward occurred, life challenges kept me very distracted — and then we moved into first quarter earnings season with lots of client work. The blog simply fell to the bottom of the list. (A sample “life challenge” was having the car hit in the rear by another car, deemed to be “totaled” and, therefore, needing replacement … but no one was hurt and the insurance claim was handled by Cincinnati Insurance** in its typically highly efficient and fair fashion … thanks folks! … so it was just time consuming.)

Expect a return to more regular posts.

Note: InsuranceIR does not have a business relationship with Allstate. 

** Full disclosure: Cincinnati Financial is not a client of InsuranceIR, but I served as the company’s investor relations officer from 2003-2009 and remain a Cincinnati Insurance policyholder (for good reason!).

Transparency that Insurance Investors WANT

With my passion for best practices in insurance-sector investor relations, I am always thrilled when I run across examples of companies doing things really well.

As an example of “providing investors with the transparency they want,” I’m highlighting the comprehensive and timely (timely = early enough to be useful) reserve-related disclosures of Endurance Specialty Holdings* (NYSE: ENH).

I recommend taking a look at Endurance’s “global loss triangles” and the various materials available on the “Quarterly Results” page of their IR site.  A number of the Bermuda carriers, including Endurance, provide global loss triangles to show their business consolidated across various jurisdictions to supplement any U.S.-only Schedule Ps. (While U.S. carriers could view their Schedule Ps as sufficient, I believe Endurance’s materials offer useful ideas that could be help enhance the 10-K or other disclosures.)

Of course, the material offers good data.  But I consider the probable “philosophy” behind the information as important as the data itself. As I have said in the past, better and more transparent communications can be used strategically to reduce uncertainty and to bolster management credibility, arguably a company’s most important intangible asset. Companies and investors win when companies give investors the detail (and data) on the drivers of current results and sources of future opportunities that investors WANT.

* Note: InsuranceIR does not have a business relationship with Endurance.

An Update On Municipal Bond Disclosures

As we move through year-end reporting, municipal bond portfolios generally seem to be holding up better than expected. But insurance companies still may want to consider ways to help investors understand the exposure their portfolio has to this sector and the risk associated with the holdings.

Comments made on this topic during Traveler’s (NYSE:TRV*) fourth-quarter call by Jay Fishman, Chairman and CEO, put the challenge in context.  As taken from the SNL transcript of the call, he noted:

“…  there seems to be this bias amongst even sophisticated people to view municipal securities are all the same, as if somehow we own some prorated share of an aggregate monolith marketplace and that’s just not the case. Everyone understands that in the taxable fixed income world, the issuer and the specific terms and conditions of the instrument matter, and that’s equally as true in the municipal arena. …”

Travelers went on to discuss how they build their muni bond portfolio and how they view it, offering a model other insurance companies might consider adopting. They provide useful metrics in a supplemental presentation (see pages 22 and 23).

Even companies that already have released earnings might benefit by adding color to the discussion of their municipal bond portfolio in their 10-K.

* Note: InsuranceIR does not have a business relationship with Travelers