Intensive Insurance Analysis

Course Objectives

The goal of this workshop is a structured approach to identifying early warning signals of credit migration in P & C and life insurance companies.

Specifically, participants will be equipped to:

• Distinguish the business and financial risks inherent in the different sub-segments of the insurance industry
• Evaluate both statutory and GAAP financial statements in order to distinguish strong and weak performers and recognise early signals of changing credit quality
• Appreciate how economic, competitive and regulatory issues impact strategy.

Target Audience

The workshop is designed for fixed income, banking, insurance and credit risk professionals. It is targeted at an intermediate level and assumes a basic understanding of accounting and insurance products. The separate but preceding one-day workshop Introduction to Insurance Financial Statements is designed as a preparation for those with limited experience of insurance company accounts.

Content

ANALYTIC OVERVIEW

Structured approach

• Purpose/payback model - a structured approach to credit
• Insurance ratings - insurer financial strength and security ratings; capital models and other tools of analysis
• Debt and equity investors - use of market indicators to evaluate credit risk

OPERATING ENVIRONMENT

Macro economic issues

• Current state and outlook for the different sectors of the insurance industry - P & C, life and re-insurance
• Sector analysis - insurance versus economic cycles
• Product risks, growth dynamics and topical issues
• Competitive issues - barriers to entry, relative bargaining power of key players
• Re-insurance - risk profile of differing contract types

Regulation and supervision

• Regulation of insurance markets - availability, premium terms and rates etc.
• Risk-based capital model - impact on investment decisions, business growth and types of capital raising

FINANCIAL FUNDAMENTALS

Statement logic

• Focal points of analysis - liability versus asset risk
• Key accounting issues - premiums, claims and reserves, investment valuation
• Statutory accounting principles (SAP) versus GAAP accounting

Business risk

• Underwriting risk - P & C - quality, diversity and growth of the underwriting portfolio, loss and combined ratios
• Reserve adequacy - adverse development, survival ratios
• Re-insurance: utilisation policy, credit and recovery risk
• Investment risk - quality and liquidity of the investment portfolio; asset and liability matching

Performance risk

• Diversity and stability of income - underwriting, investment and operating returns
• Product risk and migration-life - guarantees, variable annuities etc.
• Investment return - impact of cash yield, realised and unrealised gains and losses
• Control of distribution and operating expenses

Financial risk

• Liquidity - operating cash flow and liquid investments to match potential drains
• Solvency - operating leverage, level and quality of statutory capital position at operating and consolidated levels; risk-based capital level, resilience of capital to unforeseen losses and high growth
• Gearing - financial leverage, refinancing, debt service

Sector / peer analysis

• P & C - focus on underwriting risk, reserve adequacy and capital strength
• l Life - focus on investment risk and minimum guaranteed death and living benefits
• Re-insurance - focus on capital strength

Early warning signals

• Recognising financial and non-financial indicators
• Accounting discrepancies

MANAGMENT AND FRANCHISE

• Assessing management and operational risk
• Organisational concerns - double leverage, weak affiliates, inter-group support, capital and dividends
• Franchise - evaluating the business model.

Workshop Times

Below are typical timings for our courses; upon registration we shall advise you if these have changed.

Breakfast: 8.30am
Course Start: 9.00am
Course End: Between 5.00pm and 5.30pm
Lunch starts between 12.30pm and 1.00pm, and lasts no longer than 1 hour.
Short breaks of 10 - 15 minutes are taken mid morning and mid afternoon.