2 Things Investors Must Know From United Overseas Insurance Limited’s Annual General Meeting

United Overseas Insurance Limited (SGX: U13) held its annual general meeting late last week and I was one of the attendees.

The meeting took place in UOB Plaza in Raffles Place and a good mix of shareholders had turned up. Here are two important takeaways I have.

Importance of management

From the meeting, I got the sense that the underwriting of insurance policies (as a reminder, United Overseas Insurance, as its name suggests, is an insurance company) depends on the ability and experience of the company’s management team.

When shareholders asked how the company decides which policies it’d underwrite or which policies it’d reinsure, the board answered that most of them are judgement calls. If that is the case, it seems that having a strong management team in place would be important for United Overseas Insurance.

The company’s management may indeed have ability: United Overseas Insurance has made an underwriting profit in each year going back to 2003.

Dependence on its parent

According to United Overseas Insurance’s board, roughly 40% of the company’s premiums come via channels related to United Overseas Bank Ltd (SGX: U11). The latter has a 58% stake in the former as of 3 March 2016.

Although there is no exclusive agreement between the two companies, it can be seen that United Overseas Insurance is very much dependent on United Overseas Bank as a key channel for the distribution of its insurance products.

United Overseas Insurance’s board also mentioned that the insurer competes with other providers even within United Overseas Bank’s channels and the bank has the right to choose whichever policy is the most competitive. Therefore, United Overseas Insurance still has to ensure it has competitive products that the market wants.

Foolish Summary

United Overseas Insurance has consistently been churning out an underwriting profit over the past decade and more, as mentioned. But, with the insurer’s dependence on United Overseas Bank as a sales channel, it is important to note that the growth of the insurer might be affected by how well it competes with other insurers that the bank is also working with.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in United Overseas Insurance.