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Insurance
Making sense o the numbers
 Analysts’ perspectives on current and uturereporting in the insurance industry
November 2009
 
Contents
 
Contents
01 Foreword02 Executive summary03  About this survey04  Adequacy o current insurance reporting06Future direction o nancial reporting or insurance contracts10 Future direction o the measurement and classication onancial instruments12 Contacts
 
 A nancial reporting ramework that enables theinvestment community to make inormed judgements iscritical to insurers’ ability to attract capital and ensure theirshare prices refect the true level o value being createdwithin their businesses. However, our 2007 survey oinsurance analysts revealed strong dissatisaction with theadequacy (level o quality, clarity and granularity) onancial reporting within the insurance industry.
1
In turn,some o the proposals or change being discussed at thetime were seen by many analysts as creating what onedescribed as ‘a bigger, blacker box’.With the nancial crisis having intensied the competitionor capital and heightened the critical glare o marketscrutiny, we elt that it would be useul to nd out whetherinvestment proessionals believe that the ‘adequacy gap’between their expectations and current practice haswidened or narrowed since 2007. As the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) reach a decisivestage in their planned overhaul o insurance contractreporting, we also elt that this would be an opportunemoment to ask analysts how the eventual ramework couldbest meet their needs.Several important messages came through loud and clearrom the more than 40 interviews we carried out as part othis survey. Many o the participants believe that a lack otransparency is increasingly leading to the under-valuationo a number o the world’s leading insurance companies.To overcome these deciencies, they would like the IASBand FASB to come up with a new and improved reportingramework as quickly as possible, encouraging thestandard setters to put pragmatism beore theoreticalprecision. The desire or a swit solution was especiallystrong among lie insurance analysts using IFRS.Perhaps more o a surprise to us was the degree to whicha consensus is emerging among the analysts interviewedon the undamentals that they believe should orm thebedrock o the new reporting ramework. This consensusis rooted in a desire or reporting to refect the economicreality o an insurer’s business model. Moreover, it hasbeen interesting to note the areas where the analysts’view o reporting coincides with – and diers rom –that o the IASB and FASB.We recognise the scale o the challenge acing thestandard setters as they try to nd a single solutionthat meets the needs o disparate stakeholder groups indierent territories. The eedback rom analysts is, however,clear. The current situation is harming the industry and sothe Boards’ eorts must come to a conclusion, and quickly.It is inevitable that some analysts – and, indeed, insurers– will be disappointed by the Boards’ proposals. It isthereore essential that all sides engage in the debate andplay an active part in achieving a workable compromise.We would like to thank all the investment proessionalswho kindly gave their valuable time and insights to thissurvey. We hope that the ndings will provide a useulcontribution to the continuing debate over the utureo reporting in the insurance industry.
Ian Dilks
PricewaterhouseCoopers (UK)
 
Global Insurance Leader
Foreword
‘The quality o reporting in the insurance industry certainly has animpact on valuations and also aects the amount o money goinginto the industry.’
 Analyst survey participant
1 ‘Insurance reporting at the crossroads: What do analysts think?’, published by PricewaterhouseCoopers in November 2007.
Making sense of the numbers • PricewaterhouseCoopers
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