I believe Greenstone will be doing some road shows soon. Here are some comments based on their 30 June 2014 financial reports. If anyone on the HC site has some insurance or broking experience will be great to answer some of these questions.
1. It looks like it no longer underwrites any insurance risk. In short, Greenstone sells policies but someone else takes on the underwriting risk. Hence they look like an insurance broker almost ? Is this correct .
2. Who underwrites the policies they sell . Does anyone know ?
3. The major asset on the balance sheet is Receivables for $428m. This is based on estimating future cash flows for life insurance and pet policies.
The major variables here are the discount rate they use to discount and that is currently 9.5 % and the lapse rate ( withdrawal rate ) of policies in force.
You will see from the sensitivities that a 2% variation in interest rate and a 15% variation in withdrawal rate reduces their profit to zero.
I want to know who calculates the $428 m. I assume approved by auditors as financials audited but do they get an actuary to sign off on this receivable figure as well.
4. They are not like a typical insurance company in that they do not underwrite any risk. I presume they are therefore not regulated by APRA . Is this correct ?
5. Finally, what other companies can you compare them with ? Interested in names . If they do not underwrite any of their insurance risk then they cannot be compared with an insurance company.
6. It is almost as if they are treating their commissions as though they are a de facto insurance company. You would think they would record as income every year their commissions on policies sold. They do not do this. They estimate income over the expected life of the policy and r ecord a portion of this as income every year. In a similar way that insurance companies treat premium income and outstanding claims . I somehow think the market will not understand or like this. Any comments on this please ?
7. Any experience with selling life insurance ? Do people terminate these polices easily or do they tend to stick with paying for the policy every year ?
8. They also sell pet policies. What do you reckon people will do here. Continue paying or stop after a year or two ?
