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.
- 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.