• 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

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!).

And Now For AIFA

After almost six weeks of earnings reports and conference calls, I suspect insurance investors are looking forward to AIFA’s (Association of Insurance Financial Analysts) upcoming Annual Conference as much as I am.  The conference begins Sunday night and runs through Wednesday morning.

I’m looking forward to attending — partly because it should be warmer in Florida but more important — because it will be a great opportunity to catch up with investor and corporate friends in a less formal setting.

I’m also looking forward to listening to the panel discussions (a new format this year) that will focus on different facets of the insurance industry.  Presenter commentary and investor questions may give new insights that can help shape the direction of investor communications over the coming months.

I hope to see you there!

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

Cycle? What Cycle?

I’m back from last week’s NYSSA Insurance Conference where I listened to 16 presentations from a cross-section of small- and mid-cap insurance companies. It was a great opportunity to spend time with corporate and investor friends, both at the conference and socially.

Since my return, I continued to listen to fourth-quarter conference calls and read some of the related research as I mull the investor relations implications of what appears to be a shift in investor thinking on the insurance sector.

What is Changing?

From what I’ve seen and heard, I believe that insurance-sector investors are concluding that the pricing cycle has been “broken” and that a broad-based insurance-sector recovery is unlikely in the next few years.

Investors who have decided the cycle is broken can be expected to move their primary focus away from attempting to determine the timing of sector changes.  They are more likely to focus on determining which companies have the business model to survive (and prosper) with pricing at current levels. They will be most interested in the characteristics that distinguish each company and on how management will achieve improved return on equity and growth in book value through its own actions and choices.

Regardless, for investor relations purposes, it doesn’t matter if the pricing cycle is really broken or not, what matters is investor perceptions and related information needs. (And whether the cycle is actually broken is well outside the purview of this blog.)

Why Did I Come to This Conclusion? Continue reading

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.

NYSSA Insurance Conference Up Next

The first full week of insurance earnings is winding down with lots of interesting news, leaving us all impatient to see what the next set of reports might bring and how the market might react.

Next week, I will be attending the NYSSA Insurance Conference on Monday and Tuesday. I’m looking forward to hearing the various company commentaries. Even better, I will have the chance for some face-to-face conversations with investors on their thinking.  I will follow-up with a summary.

Also, I’ll be attending AIFA in early March. At that point, most of the year-end numbers are out, which makes it a great opportunity to hear how the investors are looking at the next year.  (If you are planning to be there, send me a note, I would love to talk in person.)

Finally, I’m planning to spend some time at NASDAQ while in New York.  I’m looking forward to learning more about their DIY release tool/capability.  I’ll report on that as well.

InsuranceIR Forms Strategic Alliance

Since forming InsuranceIR in late 2009, I have already had the privilege of offering investor relations support to seven insurance company clients. I also have stayed in touch with friends in the insurance-investor community, all of whom have been incredibly supportive of InsuranceIR (and I am looking forward to seeing many of them again soon at the NYSSA Insurance Conference in February and AIFA in March).  At the same time, I have used this blog to offer investor relations ideas for insurance companies to a wider audience.

Now, it’s time for another big step forward. As we announced earlier today, InsuranceIR has formed a strategic alliance with Dix & Eaton, a solid, full-service investor relations firm. Together, we’ll be able to offer insurance-sector clients the specialized expertise of InsuranceIR as well as the depth of resources available from an established IR firm. (And the InsuranceIR blog will continue to offer ideas!)

I’m particularly excited because Dix & Eaton’s team has deep expertise on issues such as corporate governance that are very timely for insurance companies (but not industry specific).

As background, Dix & Eaton has offered investor relations services since 1970. Their capabilities include shareholder communications, investor targeting, M&A/IPO communications, proxy contests/shareholder activism, bankruptcy communications, investor perception studies, IR websites and digital strategies, annual reports, IR training, IR function development and assessment, and more. Dix & Eaton also provides clients with public relations and customer communications. Founded in 1952, the firm has been named the best midsize firm and the best midsize, full-service firm in the United States. For more information, visit dix-eaton.com.

Rob Berick, who oversees the Dix & Eaton investor relations practice, has developed and executed investor relations programs for companies in a wide range of industries and market cap sizes over the past 20 years. He blogs on investor relations topics at StreetTalk.  His recent series on Preparing for Proxy Season 2011 is excellent!

This should be great fun!

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.

Managing the Message — Insurance-Sector IR

Yesterday SNL Financial* hosted a webinar titled “Investor Relations for Insurance Companies – Managing the Message.” For the discussion, Jean Peters and I shared our perspectives on the challenges faced by insurance-sector IR teams and how to overcome those challenges. We talked about shaping the company’s message to meet investor needs  and about attracting and retaining the right investors, with the ultimate goal of increasing company valuation.

Jean is Managing Director for Golden Seeds LLC and formerly Senior Vice President – Investor Relations, Corporate Communications and Strategic Planning for Genworth Financial.

The slides are below. A replay of the webinar will be available on6 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.

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