• 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

“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.

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Building an Effective Earnings Package — SNL Webinar Available for Replay

Last Thursday (August 16), SNL’s Center for Financial Education* hosted a webinar titled “Bank and Insurance Investor Relations Best Practices: Building an Effective Earnings Package” For the discussion, Ronald H. Janis, partner, Day Pitney LLP, Jeffrey A. Schoenborn, principal, Casteel Schoenborn Investor Relations, and I provided insight and best practices on building an effective earnings release package. Our comments focused on the special challenges and needs of the banking and insurance industries, with the ultimate goal of helping you maximize shareholder value.

The slides are below. A replay of the full webinar is on the SNL website.

* 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.

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

Good News — FASB/IASB Insurance Contracts Convergence “Not Likely”

Last week, it was reported by PWC and other sources that FASB Chairman Leslie Seidman had “indicated that based on the nature and totality of differences between the FASB’s and IASB’s (the boards’) views, it is not likely that the two boards will achieve convergence on this [insurance contracts] project.”  The full text of the PWC item is available here.

As envisioned as recently as two weeks ago, the FASB and IASB plan to converge the two standards’ insurance contract accounting was expected to radically change the way insurance companies presented their financial results. In a blog post last year, I noted that “investors with whom I have spoken believe the proposed changes would result in lower book values and more volatility in earnings and book values for insurance companies.

Keeping in mind that the presentation of financial data is intended to help the users of the information (investors) better understand a company and its future prospects, I believe we all should applaud FASB’s decision to step back from the potentially problematic changes that were being considered.  I believe we also should express appreciation for the input provided to FASB and IASB on the proposals over the past several years by representatives of the insurance-sector investment community, individual insurance companies and industry groups.

Last week’s reports also indicated that FASB now expects to begin exploring potential refinements to U.S. GAAP accounting for insurance contracts. We can all look forward to opportunities to support FASB in those efforts.

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.

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!