• 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

Should IROs Care? – FASB’s newest proposal for insurance contract accounting

Discussion of changes to insurance contract accounting has been going on for over a decade. With its newest proposal, the Financial Accounting Standards Board is asking for comments on an updated proposal for standards that likely would be effective on January 1, 2018.

That sure does seem very far away.

I think that extended time frame – and the number of times this topic has come up and then been relegated to the back burner – has contributed to a lower profile for this most recent update. Continue reading

SNL Seminar: Effective Investor Relations (Atlanta – December 10-11)

Something to look forward to — an executive seminar tailored specifically for bank, insurance and REIT professionals covering Effective Investor Relations hosted by the SNL Center for Financial Education* on Monday and Tuesday, December 10 and 11, in Atlanta. The program for the seminar will be directed by Lynn Casteel and Jeffrey A. Schoenborn, principals of Casteel Schoenborn Investor Relations, who bring significant experience with bank and REIT investor relations. InsuranceIR will offer the insurance-sector IR expertise. (You may recall that Jeff and I teamed up for an SNL webinar in August on Building an Effective Earnings Package.)

I encourage you (or one of your IR team members) to consider joining us in Atlanta for this seminar. Unlike generic IR courses, Effective Investor Relations is designed specifically for our industries. We plan to provide participants the framework and tools to:

  • Develop or enhance a comprehensive IR and shareholder communications plan for their company taking into account the specific challenges of these industries
  • Execute it effectively in compliance with laws, regulations and best practices and
  • Evaluate its effectiveness

Over the two-day seminar, we plan to use case studies, prepared materials and lectures, to share ways to increase investor awareness and understanding of your company and ultimately build an IR program to increase shareholder value and position your company for growth. A quality investor relations program enables a company to positively influence its cost of capital and growth potential by increasing investor awareness of the company, elevating understanding of its strategy and market opportunities, showcasing the strength of its management team, and favorably differentiating the company from peer stocks.

Throughout the course, we plan to offer participants opportunities to break off into small, sector-specific groups working under our sector-specific expertise, making this the most relevant IR training you’ll find.

I encourage you to visit the SNL website to learn more about the agenda and other details for Effective Investor Relations (and register, if you wish). I would love to see you in Atlanta.

* Full Disclosure: InsuranceIR LLC purchases data services from SNL Financial and participates in their “IR Partner Program.” Under the terms of that program, any company that contracts for services from SNL based on my recommendation receives a credit on their initial bill. InsuranceIR does not receive any cash compensation for referrals. By participating in various marketing activities with SNL, I may receive non-cash benefits, such as higher visibility.

“Don’t Wait” – The Common Conclusion from a Collection of Observations

The four weeks since I participated in the SNL webinar on building an effective earnings package have been busy, both for InsuranceIR and for insurance-sector investor outreach in general.  Insurance-sector investors seem to be opting to travel to more conferences and to engage more frequently in other investor marketing activities; and companies are taking advantage of the heightened interest.

InsuranceIR has been in that mix, assisting clients with investor outreach efforts (among other projects.)  I also have been spending time on my ongoing efforts to stay up-to-speed on the big picture – what investor “thinking” about the sector might mean for insurer investor communications.

I have concluded from what I am hearing and seeing that the primary piece of advice I should offer is this: Don’t Wait.

And by “Don’t Wait,” I mean don’t wait to:

  • Reach out to investors — Investor interest in our sector clearly is growing. Proactive efforts to tap that interest are likely to be more effective than waiting to be discovered. A company that chooses to wait on the sidelines for the “right time” or the “right story” may find itself overlooked or viewed as “hard to follow.”
  • Differentiate your company – I have gotten the distinct impression that insurance-sector investors have begun to look beyond the “safe names.” As encouraging as that news may be, it is simply an opportunity for the smaller names, not a guarantee of interest. Explaining the differentiators that will drive improvements in return on equity for your company is more important than ever.

I draw these recommendations from a variety of sources, including conversations with investors, listening to investor presentations (in person and online) and reviewing research and other reporting, e.g., SNL news stories.

For example:

  • My Observations of Long-term Insurance Investors — In particular, I have been intrigued by the sense that   investors who have long specialized in the insurance sector are “taking a new look” at the less well-known or out-of-favor names.  This bodes well for companies that make themselves available and can offer a compelling response to “What is your key (strategic) differentiator?” These knowledgeable investors are not likely to want a run down of the history of your company’s lines of business, or your assessment of the company’s current valuation vs. relative or historic levels.  Instead, the best approach is to offer a concise and articulate summary of the strategies being implemented to allow your company to achieve its target ROE.
  • And My Observations of “Underweight but Looking” Investors — I also am excited to see investors who have been underweight in the sector in recent periods participating in various forums. This group definitely includes some who know the sector well, but generally these investors are more likely to appreciate management covering some basics of the business. But all investors normally find it easier to listen to those details if they are provided as the support for a compelling strategy, rather than serving as a lengthy introduction to that strategic message.
  • My Sense that More Questions are Probing for “Why Are You Different?” — I am pleased to report that I am hearing a subtle shift in the questions asked at various forums from “Why is your company less risky?” to “What makes your company more unique?” I encourage companies to be prepared to take advantage of open-ended question such as, “If you implement, what will your company look like?”
  • Seeing Various Data that Supports the “Need to Differentiate” Argument — For an investor, understanding individual company performance and a company’s differentiators – strategic or structural – are likely to be the ultimate driver of interest. Case in point — in a report issued yesterday, Bill Wilt of Assured Research laid out a very interesting analysis titled “Regional Insurers at a Crossroads.” The report contrasts the average performance of 15 regional carriers to a broader basket of insurance companies. Whether it is the weaker performance of this regional group, or some other data aggregation, companies need to be certain to help investors distinguish their company — for quantitative or qualitative reasons – to avoid being lumped in with some “average.”

So I Will Say It Again – Just Don’t Wait

Back in March, I was making an argument for differentiating (see the post titled “Mulling AIFA – It Really Is Time to Differentiate!” ).

I would argue that today that there is new urgency for augmenting your company’s communications to help make certain investors have the right information to differentiate your company so they can assess its future potential and valuation.

SNL Webinar on 8/18: Building an Effective Earnings Package

Please join Ronald H. Janis, Partner, Day Pitney LLP, Jeffrey A. Schoenborn, Principal, Casteel Schoenborn Investor Relations, and me on Thursday, August 16, from 1:30-3:00 p.m. ET for a (free) SNL Financial* webinar titled “Bank and Insurance Investor Relations Best Practices: Building an Effective Earnings Package.”

We plan to provide insight and best practices on building an effective earnings release package, with a focus on the special challenges and needs of the banking and insurance industries, with the ultimate goal of helping you maximize shareholder value.

(Also, the webinar will provide CE credits for the CFA Institute and National Association of State Boards of Accountancy.)

* Full Disclosure: InsuranceIR LLC purchases data services from SNL Financial and participates in their “IR Partner Program.” Under the terms of that program, any company that contracts for services from SNL based on my recommendation receives a credit on their initial bill. InsuranceIR does not receive any cash compensation for referrals. By participating in various marketing activities with SNL, I may receive non-cash benefits, such as higher visibility.

Q2 Calls — Are You Ready For Your Hour In The Spotlight?

We are halfway through 2012 and it is earnings season again. As always, managements and investor communications teams are crunching and drafting to get ready for their respective “big day.”

But remember that investors hear from all companies during earnings season. So, how can your management team be best prepared for its turn in the spotlight – that one hour during earnings season when insurance-investor attention is focused on your company?

Well, insurance companies differ enough that there is no absolute, “one size fits all” recommendation. But I have visited with a number of insurance analysts and investors in recent weeks (and read my share of industry commentary). I believe there are some common themes on the radar screen this quarter.

Before I turn to those themes, I wanted to briefly comment on how the call can be used to best effect. Continue reading

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.

An Opportunity To Differentiate

Bill Wilt, a widely respected former sell-side analyst, recently formed Assured Research, a business advisory firm “dedicated to delivering highly customized, financially-oriented, actionable research and analysis to insurance and insurance-investment professionals.”

Bill recently published an Essay on Growth – Growth is Dead, Long Live Growth! – that offers interesting insights into investor views of premium growth opportunities for property casualty insurers. It also addresses ways in which insurers might be able to leverage their opportunities.

In particular, he highlighted that cutting edge analytical tools and research offers insurers the insights that could allow them to move beyond “cycle timing” to become true growth companies.

From my perspective, Bill’s commentary also highlights another way in which insurance companies might differentiate their business model with investors.

As growth becomes a more common topic, the basic metrics of rate, unit and exposure growth trends by just a handful of lines of business may not be sufficient.  Companies may benefit from providing additional details to allow investors to truly assess the potential of their growth strategies.

In looking for ways to provide that additional detail, insurers may find that the data that supported the decision to target specific market segments may also have value as part of the investor communications effort.  (And if competitive intelligence is a concern, there are many techniques for appropriately using comparative data to illustrate management’s strategies without “giving away the store.”)