Earlier this month, Forbes released the 2014 list of the America’s 100 Most Trustworthy Companies, based on data from proprietary ratings provider and investment advisor GMI Ratings. The list included publicly-traded North American companies of all sizes and industries except one: financial companies, more specifically, banks and insurance companies.
James Kaplan, director of GMI Ratings, says that measures taken in the wake of the financial crisis have led a high number of financial institutions to rank among the most trustworthy in America, according to GMI’s criteria. The dominance of this particular industry led Kaplan to generate a separate list of the 50 Most Trustworthy Financial Companies.
“In 2012 and 2013, governance and transparency has really improved,” says Kaplan. “[Financial companies] took on a lot of speculative risk and the regulatory agencies have really been on their backs to clean up their balance sheets, income statements, and lending policy.”
To develop lists of trustworthy organizations, GMI reviews the accounting and governance behaviors of more than 8,000 publicly-traded companies in North America. In assessing each company, GMI considers factors including high-risk events, revenue and expense recognition methods, SEC actions, and bankruptcy risk as indicators of a company’s credibility.
These factors are used to develop "Aggressive Accounting and Governance Risk" (AGR) numbers, the final composite by which organizations are scored. Companies appear on the list divided into categories by market cap size, along with their current AGR and average AGR over the past four quarters.
Kaplan stresses that companies that don't make the list aren't necessarily untrustworthy--these are simply the 50 with the highest scores for the past four quarters of the fiscal year.
Coming in with the best scores in both the large and mid cap segments are insurance outfits
Kaplan says that a shift among regulatory agencies from a "watchdog" to a "policeman" stance has prompted many of the more visible changes among financial institutions, which have led in many cases to less risk and greater transparency.
"You look at a few things: CEO and Chairman are the same person, that used to be very common and it’s kind of disappearing. The amount of loans in the very high risk category were substantially higher. Loan loss reserves were very low."
So what’s the takeaway for investors? As with the Most Trustworthy Companies list, inclusion on the list doesn't necessarily indicate an investment blockbuster, but it does mean that good or bad, what the investor sees is what the investor gets—a metric that many investors find particularly meaningful post-crisis.
“If you’re interested in investing in any of the companies on this list, you can be really comfortable that what you’re reading about them is an honest reflection of what’s going on in the company,” says Kaplan. “That doesn't mean it’s good or bad—but when you read it, you can believe it.”
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| Company Name | Ticker | Market Cap | Industry | Current AGR® | Avg AGR Last 4 Rated Qtrs | |
|---|---|---|---|---|---|---|
| Large Cap (Over $5 Billion) | ||||||
| Cincinnati Financial Corporation | CINF | $7,836.0 | Insurance | 100 | 99 | |
| Reinsurance Group of America Inc | RGA | $5,637.0 | Insurance | 100 | 95 | |
| Loews Corporation | L | $17,134.9 | Insurance | 75 | 90 | |
| Axis Capital Holdings Limited | AXS | $5,167.1 | Insurance | 92 | 87 | |
| Signature Bank | SBNY | $5,900.2 | Banking Services | 86 | 85 | |
| XL Group plc | XL | $8,453.9 | Insurance | 71 | 82 | |
| American Financial Group Inc | AFG | $5,085.8 | Insurance | 71 | 80 | |
| Mid Cap ($1 Billion to $5 Billion) | ||||||
| Erie Indemnity Company | ERIE | $3,092.0 | Insurance | 98 | 99 | |
| Westamerica Bancorporation | WABC | $1,436.4 | Banking Services | 98 | 98 | |
| Mercury General Corporation | MCY | $2,445.3 | Insurance | 99 | 95 | |
| Greenlight Capital Re, Ltd. | GLRE | $1,219.8 | Insurance | 97 | 93 | |
| Aspen Insurance Holdings Limited | AHL | $2,547.8 | Insurance | 88 | 91 | |
| First Interstate Bancsystem Inc | FIBK | $1,195.7 | Banking Services | 87 | 89 | |
| Union First Market Bankshares Corp. | UBSH | $1,194.4 | Banking Services | 96 | 88 | |
| Old Republic International Corporation | ORI | $4,190.8 | Insurance | 96 | 87 | |
| Synovus Financial Corp. | SNV | $3,384.0 | Banking Services | 83 | 86 | |
| Capitol Federal Financial, Inc. | CFFN | $1,848.0 | Banking Services | 96 | 86 | |
| Aircastle Limited | AYR | $1,593.5 | Banking Services | 89 | 86 | |
| PrivateBancorp Inc | PVTB | $2,385.1 | Banking Services | 86 | 85 | |
| Horace Mann Educators Corporation | HMN | $1,173.3 | Insurance | 92 | 85 | |
| Northwest Bancshares, Inc. | NWBI | $1,387.6 | Banking Services | 79 | 84 | |
| Assurant, Inc. | AIZ | $4,714.8 | Insurance | 76 | 82 | |
| International Bancshares Corp | IBOC | $1,739.3 | Banking Services | 88 | 82 | |
| TAL International Group, Inc. | TAL | $1,437.6 | Banking Services | 92 | 81 | |
| CNO Financial Group Inc | CNO | $4,162.3 | Insurance | 91 | 79 | |
| Small Cap ($250 Million to $1 Billion) | ||||||
| Community Trust Bancorp, Inc. | CTBI | $670.0 | Banking Services | 96 | 95 | |
| National Interstate Corporation | NATL | $531.1 | Insurance | 95 | 95 | |
| First Busey Corporation | BUSE | $524.3 | Banking Services | 94 | 95 | |
| First Connecticut Bancorp Inc | FBNK | $268.0 | Banking Services | 98 | 94 | |
| First Commonwealth Financial | FCF | $870.5 | Banking Services | 96 | 93 | |
| Safety Insurance Group, Inc. | SAFT | $823.3 | Insurance | 95 | 91 | |
| Arrow Financial Corporation | AROW | $332.0 | Banking Services | 97 | 90 | |
| Sandy Spring Bancorp Inc. | SASR | $645.0 | Banking Services | 95 | 89 | |
| The Navigators Group, Inc | NAVG | $871.1 | Insurance | 86 | 89 | |
| Donegal Group Inc. | DGICA | $311.2 | Insurance | 88 | 88 | |
| Wilshire Bancorp Inc | WIBC | $909.1 | Banking Services | 100 | 88 | |
| Triple-S Management Corp. | GTS | $466.7 | Insurance | 91 | 87 | |
| BancFirst Corporation | BANF | $887.0 | Banking Services | 70 | 85 | |
| Flushing Financial Corporation | FFIC | $650.7 | Banking Services | 91 | 85 | |
| State Auto Financial Corp | STFC | $890.3 | Insurance | 96 | 85 | |
| Stewart Information Services Corp | STC | $796.1 | Insurance | 68 | 85 | |
| Meridian Interstate Bancorp, Inc. | EBSB | $603.3 | Banking Services | 96 | 85 | |
| Amerisafe, Inc. | AMSF | $811.6 | Insurance | 80 | 84 | |
| Banner Corporation | BANR | $817.1 | Banking Services | 86 | 83 | |
| EMC Insurance Group Inc. | EMCI | $467.6 | Insurance | 89 | 83 | |
| First Financial Corp | THFF | $455.4 | Insurance | 93 | 83 | |
| Lakeland Financial Corporation | LKFN | $669.7 | Banking Services | 78 | 83 | |
| United Fire Group, Inc. | UFCS | $749.9 | Insurance | 98 | 82 | |
| Central Pacific Financial Corp. | CPF | $841.3 | Banking Services | 94 | 81 | |
| Lakeland Bancorp, Inc. | LBAI | $418.2 | Banking Services | 74 | 81 | |
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