• 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

From D&E: Preparing for Proxy Season

I encourage insurance companies to take a look at “Be Ready, Be Smart: 7 No-Nonsense Ways to Prepare for Proxy Season.”

The article is a great overview of the current proxy environment and offers very useful advice for companies in any industry.

One of the two authors is Rob Berick, senior managing director of Dix & Eaton. The depth of expertise that the Dix & Eaton team brings to governance and related topics is one of the reasons I am so pleased to have a strategic alliance with the firm.

Say-On-Pay Reputation Risk for Insurers

(Actually, the potential for reputation risk may exist for all publicly traded companies with investment operations, but there may be different aspects to take into consideration for different industries.)

As has been widely reported, the SEC yesterday finalized its rule titled “Shareholder Approval of Executive Compensation and Golden Parachute Compensation,” better known as Say On Pay. The entire 152-page rule is available here, and the SEC’s summary and fact sheet here. Law firm WilmerHale has posted one of many available summaries here.

The rule affects companies in every industry; insurance companies aren’t treated any better, or any worse, although smaller reporting companies are exempt until 2013.

But there’s one interesting twist for companies that file 13-F reports with the SEC regarding the holdings in their investment portfolio.  The Dodd-Frank Act required those 13-F filers — a classification that includes most insurance companies — to annually disclose how they voted on say-on-pay and golden parachute matters for holdings in the portfolio.

Although the final rule issued yesterday does not yet address this requirement, I encourage insurance companies to keep this in mind as proxies are voted by their investment operation. I have seen one report that the SEC indicated in their open meeting yesterday that they would address this topic in the coming month.

This rule could expose insurance companies to “reputation risk” if their investment team votes proxies for say on pay in a fashion out of line with the board and management’s stance on the company’s own corporate governance.  I suspect the most likely disconnect would reflect a company:

  1. Recommending to its shareholders that say-on-pay voting occur every three years while
  2. Voting proxies for holdings in its portfolio for say-on-pay voting to occur every year, regardless of the recommendations made by the respective companies’ boards.

It’s akin to “do as I say, not as I do.”  It will be interesting to see how the SEC shapes these reporting rules.

The Convergence of IR and Governance

Earlier this week, our local NIRI chapter hosted John Siemann of Phoenix Advisory Partners for an interesting and informative session.

In the context of changes to the proxy process arising from Dodd-Frank and other SEC actions, John talked about the growing convergence of investor relations and corporate governance.The convergence is driven by two factors: the reputation risk associated with “governance” and the overlap between the skills and relationships of the IR team and the variety of activities associated with corporate governance.

Here’s his full presentation. Below, I’ve highlighted a few specifics.

Most of the changes in the corporate governance landscape affect companies in every industry; insurance companies aren’t treated any better, or any worse.

But there’s one interesting exception.  There is a Dodd-Frank requirement for all 13-F filers — a classification that includes most insurance companies — to annually disclose how they voted on say-on-pay and golden parachute matters for holdings in the portfolio. An insurance company could face reputation risk if the investment team votes proxies in a fashion out of line with the board and management’s stance on the company’s own corporate governance.

Other items of note: Continue reading

RAFSA — Good or Bad for Insurance Companies?

RAFSA Dodd-Frank = The Restoring American Financial Stability Act of 2010 DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT.

As far as the proposed regulations pertain to the operation of insurance companies, the summaries I’ve seen conclude that RAFSA (in its current form) should be relatively benign for the insurance industry.

But the Act’s governance provisions, with the related demands on investor communications, may create risks for insurance companies.

For example, the Act is likely to pass with a majority voting standard for directors. In an environment where it is getting tougher to find qualified board members, this may be of particular concern for smaller property casualty insurers.

According to SNL data, insiders own less than 20% of the outstanding shares at 31 of the 52 insurance companies with a market cap below $1.0 billion. The remaining shares split between institutions — which are increasingly likely to take an activist role if they are unhappy with company performance — and individuals — for whom voting patterns have steadily weakened in recent years.

I believe companies can minimize the potential risk by engaging all shareholders through a comprehensive and integrated communications program. As a first step, make sure your communications are reaching all of your investor constituencies, using channels and formats that meet their specifics needs, rather than assuming that a one-size-fits-all approach will keep your company in front of every shareholder.

This is just one challenge of the Act (others also are interesting). Summer is a great time to get a head start of these types of investor communications challenges, because the calendar is just a bit lighter. Waiting until next spring may be a risk.

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The Washington View

Earlier today, Jeff Morgan, president of the National Investor Relations Institute (the IR professional organization), spoke to our local chapter. His presentation titled Financial and Regulatory Reform and other Critical IR Issues was a thought-provoking look at relevant items under consideration by Congress and the SEC.

He sees a high likelihood that all companies (not just the big “Wall Street” financial institutions) will be facing a myriad of governance and other changes by fall. Many of the expected changes have a direct bearing on the way investor relations is practiced, making the function even more critical. This is a topic on which I know I’ll be spending more time in coming weeks.

Thanks to Jeff for making time to visit Cincinnati and share his insight.

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