Bermuda-based ESG Re has taken the somewhat unusual step of putting shareholders’ questions, and the company’s responses, on-line through a press release and on its website.
The company recently reported a $5.5 million net loss for the first quarter (See IJ Website May 13), and the questions and answers it has posted essentially explain to shareholders and other concerned parties not only the reasons behind ESG Re’s Q1 results, but also the technical and accounting terms necessary to understand them.
A typical question and response concerned the company’s investment income figure, as follows:
“What is the reason for the lower investment income?
Investment income amounted to $1.9m for the quarter, which was largely offset by realized investment losses of $1.1m on the portfolio. The decline in investment income is a function of downward pressure on investment yields and reduction in the overall size of the portfolio. Average portfolio size for Q1, 2002 was in the region USD 135m, compared with an average portfolio in excess of USD $160m for Q4, 2001. — Realized losses on USD 1.1m resulted largely from the sale of a corporate bond of USD 0.6m. which no longer met the Company’s strict investment criteria. Other losses resulted from liquidation of US government treasuries and other corporate bonds to meet working capital requirements.
The questions and answers are posted on the Company’s website at: www.esg-world.com under Financial Information, Financial Statements.
While most companies to some extent explain their results and financial statements when they issue them, ESG Re’s extra effort in putting together a complete set of questions and answers, and the candor of the responses, is a welcome sign of transparency. In a time marked by
hidden financial transactions (Enron) and the influence of money over sound investment advice (Merrill Lynch) such openness deserves to be recognized and congratulated. More companies should follow ESG Re’s example.
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