Equity Research Interview Project
Hey guys, As part of an interview process for a sell-side ER department I have been tasked with creating a one page earnings writeup with recommendation for the most recent quarter for an insurance company. Also, I need to create an earnings model forecast going through 2013.
Honestly, I've never wrote an earnings note - an example would be great. Any advice/tips for this project would be welcome, especially considering it is a financial stock.
Edit: This is due Monday morning.
Sent you an example I downloaded the other day on CRM.
Make it similar. Read quotes from other writeups on your company. Earnings model should not be too complicated if this is your first time. Find info on growth rate of your insurance company or use a slightly smaller than last few quarters.
If only projecting to end of 2013, I suggest you project by quarters.
Good luck
Thanks for the attachment.
Yeah, I was thinking the same for the model itself - I was mostly concerned about the writing portion of the project.
I appreciate the help!
Hey, could you send me the write-up example? I'm trying to do those for practice.
Does anyone have access to a sell side insurance report? That would be great for me to look at too. I am just curious how they normally forecast out some of the line items.
On a one page report, you are not going to see a model breaking it down line by line.
The report will have some basic data on the stock (price, yield, 52 week high/low, mkt cap, etc.)
Regarding forecasts, you will have some combination of EPS, Consensus EPS, Price, Book Value, ROE, P/E, and P/BV.
As I am sure you know, BV is not often used outside financials. In insurance, be sure to use xAOCI BV; there can be a significant difference between that and BV.
The rest of the report will be a discussion of the company, recent developments, and strengths/weaknesses. It should start with your declaration, then list 3-5 points supporting it.
Thanks West Coast Rainmaker... but from how I am reading the instructions the model part is separate from the one page writeup.
"Also, please construct an earnings model forecast going out through 2013. You’ll find the earnings release and/or financial supplements helpful with consolidated and segment level details".
So basically, what I am doing now is creating a consolidated income statement. I think I am going to create an additional tab breaking down at least the premium revenue which is historically around 75% of total revs. The other main sources of total revenue include administrative fees (5%) and net investment income (20%). Am I getting carried away here?
Yes, you also may want to break down revenue by division/business.
For example, for All State Corp, their Protection Segment, their Financial Segment, and then their other biz segments.
Yes, break it down by segment. If you want to be particularly thorough, break it down line by line. Have a general growth rate to apply to each item, but them be able to adjust for seasonal variation, management plans, etc. You want to be able to demonstrate how each contributes to earnings.
For instance, a P&C insurer might see claims jump at one time of the year, depending on what they insure.
Also, breaking it down by where revenue comes from (investments, premiums, etc) is standard.
Thanks again everyone. They said they like what I put together and so now I proceed on to the third round interview.
Mr. Machina, Can I see what you put together?
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Just an update: I ended up getting the offer last week. After several ER/AM internships, I finally got a perm position! Thanks all.
Congratulations on the offer/position. Was it for the firm that asked for the earnings model/note?
Yes, it was for the same company.
Hi Mr. Machina, I have found myself in a similar situation to your own (although in a different sector) and I was curious if you still had/would be able to share the report you made, or perhaps the example @marauders4 sent you? I'd greatly appreciate it.
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