• 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

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.

(Wow) Accounting Standards from the IR Perspective

This past Monday, I had the privilege of attending the National Investor Relations Institute’s (NIRI) annual liaison meeting with Financial Accounting Standards Board (FASB) board members and staff. FASB and NIRI organize the session each year to offer investor relations practitioners a chance to “discuss standards from the investor communications perspective.”

The Session was Excellent

FASB allotted three hours for the liaison meeting, giving us plenty of time for the formal agenda as well as informal conversation and Q&A. About 15 people attended from FASB, including two board members and staff members with a variety of responsibilities. The FASB group shared updates on their initiatives and projects. Among the subjects covered were convergence to international accounting standards (IFRS), the disclosure framework project, revenue recognition, leases and financial instruments.

Those of us attending with NIRI gave feedback to FASB about the challenges we face communicating with investors. Our comments generally focused on how the accounting framework helps or hinders our ability to present historical and prospective information so that investors can make informed investment decisions or recommendations.

Specific to the Insurance Industry

We had the opportunity during the session to spend a few minutes learning more about the work FASB is doing in conjunction with the IASB on proposed changes to the accounting for insurance contracts. (See the Update on Insurance Contracts – a Joint Project of the IASB and FASB – for full details of the project.)

I believe the discussion of the insurance contracts project was positive. It provided an opportunity to highlight – from the investor relations perspective – some of the potential problems the proposed changes might create for insurance-sector investor communications.

The FASB group was very interested in our input and acknowledged the high volume of investor feedback they have received about the insurance contract proposal. They stressed how open they remain to feedback on the topic. Continue reading