Shareholder value measures in general insurance

Document description

Investors’ primary interest in a company is its ability to produce value to them in the future. Therefore, investors want information about a company’s potential for creating shareholder value. Value is created by enhancing a company’s prospects and this, to a large degree, stems from a company’s competitive advantage together with the ability of management to choose and implement a strategy that exploits that advantage. Many managers believe that a gap exists between the internal perception of a company’s value and that of the stock market. The Shareholder Value framework seeks to provide an environment where management can effectively bridge this gap by linking internal and external perspectives by making key aspects of a company’s capabilities and performance more transparent to investors. This paper provides a brief introduction to Shareholder value and illustrates current practice in a number of industries, in particular the measures and commentaries given in Report and Accounts. Overall, it was found that there was no market agreement as to the most appropriate Shareholder Value measures to use, however, organisations continue to report traditional ones such as Dividend per share, Earnings per sham, Book Value or Net Asset Value per share, Return on Equity or Capital etc.