The Financials sector can be divided into ‘Banks’, ‘Diversified Financials’ and ‘Insurance’. These companies are both B2B and B2C. Banks and Diversified Financials essentially sit between borrowers and lenders, and essentially organize the transfer of monies from present to future. The insurance group organizes the transfer of risks where underwriters take on risk, the insured sell risk, and brokers and intermediaries help manage the process.

Banks basically earn money from the spread between lending rates and borrowing rates, and service fees. Diversified Financials also earn money primarily from spreads (consumer finance and capital markets) and service fees (real estate investment vehicles). Banks and Capital Market companies may also earn speculative earnings by taking risky positions. Insurance underwriters earn profits primarily from the difference between premiums collected and claims paid, while insurance brokers and intermediaries collect a commission and/or earn servicing fees.

A unique aspect of this sector is regulation. Most companies in this sector are highly regulated. Clients are generally longer term than many other sectors. This can contribute to relatively low cash flow risks. Investors may apply higher risk to companies that partake in speculation.

AN Valuations is experienced in the Financials sector, in particular the Insurance and Capital Markets groups.