The worldwide insurance industry may be worth more than you think. Industry analysts believe that reporting isn't as consistent as it could be, and that improvements to insurance financial reporting would pump up those stock prices.
PricewaterhouseCoopers interviewed more than 40 investment professionals from the U.S., Asia and Europe, finding that dissatisfaction with insurance financial reporting was widespread. They'd like to see the International Accounting Standards Board and Financial Accounting Standards Board build a better mousetrap for the industry.
Ian Dilks, PwC's global insurance leader, said, "Feedback from global insurance analysts is clear; they believe the current reporting situation is harming the insurance industry and they are calling for the IASB and the FASB to come to a conclusion, and quickly. The desire for a swift solution is especially strong among life insurance analysts using IFRS." He continues, "The degree to which a consensus is emerging among analysts on the fundamentals that they believe should form the bedrock of the new reporting framework, is a significant step."
Nearly 90% of the survey participants indicated that the insurance industry is different enough from the rest of the business community to warrant its own reporting model. In the U.S., this perspective was unanimous. Some 56%prefer different approaches for life and nonlife businesses, with close to 70% interested in seeing contracts that contain differences in risk and earnings profiles to be accounted for based on the specifics rather than by taking the contract as a whole. The result would be an increased accuracy in reporting that reflects the financial conditions the carrier faces rather than the expediency of looking at a document in only one way.
The analysts are fine with a "big bang" change, in which financial instrument and insurance contract accounting changes are blasted out to the industry at once in a coordinated manner -- 64% are leaning this way. The other 36% would like to see the new rules for financial instruments picked up first, so the industry could be compared to other industries more easily.
More than anything else, the conversation must continue, says Andrew Hill, a partner at PwC: "It is now essential that all sides engage in the debate and play an active part in achieving a practical and workable standard that meets the needs of the users of the financial statements." He leaves room for the fact that "some analysts, and indeed some insurers, will be disappointed by the board's final proposals." But, the upside to sensible financial reporting could be increased shareholder value ... who wouldn't want that?
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Reader Comments (Page 1 of 1)
11-28-2009 @ 12:52AM
a said...
Save the world economies they have been bled for many years by the false prophet of security ! abolish insurance rarely represents the insured !
11-28-2009 @ 7:43AM
Dan Barnett said...
a, Dude,
Harsh.
Abolish Life Insurance, so that the families of those who die prematurely are left destitute? Abolish Auto Insurance so that those injured by penniless drunk drivers, have no recourse? Abolish Health Insurance so that families are beggared by catastrophic health problems?
The best thing about insurance though a, is that except for Auto Insurance which is generally more to protect others agianst you, insurance is not mandated so that if you don't want to buy any & live with the dice roll, you can.