Are firms positioned for sound communications?
New disclosures and metrics will be complex.
The investor community is generally positive about the new accounting standard and expresses high hopes of improved comparability in disclosures. Some analysts expect to get a far clearer handle on the quality of the businesses they scrutinise as a result of the increased granularity in disclosures. A few of them also display an appetite for even more information – for example, details on different product characteristics with performance of different business vintages year on year.
Many insurers expect to produce additional information in the form of supplementary disclosures, but these are not intended to satisfy the appetite of these evangelical analysts. Instead they will aim to capture performance metrics which support the investor story despite not featuring in the new accounting regime. Regulatory capital, cash generation, value of new business, combined ratio, operating profit and embedded value are a few examples.
So far, there has been little engagement between insurers and the investor community about the new standard. The sooner insurers consider the implications of the new standard for their communications strategy, the better. Investor relations (IR) teams must be brought on board without delay to give them the necessary time and resources to formulate a communications strategy. Start to formulate a broad-based communications strategy at least 12 months before going live with disclosures under the new
Read part one of the series (risk management) here and part two (technology) here.