Guide to Analysing Companies

Institutional investor
An institution (such as an insurance company, pension
fund or investment trust) that makes substantial invest-
ments by gathering together the small savings of others and
acting collectively on their behalf. In recent years, individuals’
savings have increasingly been channelled through these insti-
tutions and they have come to have great influence in most fi-
nancial markets. In the UK, for example, they hold more than
70% of all quoted securities. Institutional investors are
stronger in Anglo-Saxon countries where pensions are more
frequently funded by accumulated savings from the private
sector. However, the increasing cost of paying for people’s pen-
sions on a pay-as-you-go basis (particularly with the rising pro-
portion of old and retired people compared with the number of
younger ones in work) has forced other countries to follow suit.
Institutional investors are usually divided into those that spe-
cialise in retail money, running mutual funds and other in-
vestment vehicles aimed at individual investors, and those that
specialise in institutional money, such as large companies’
pension funds. The fees for managing the former are, by and
large, higher partly because it costs more to look after lots of in-
dividual savers.
Insurance
A contract between two parties (the insurer and the insured)
in which the insurer (usually an insurance company) agrees to
reimburse the insured for clearly defined losses. It does so in
return for payments of a premium. In essence, this is a process
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for transferring risk from an individual to a larger group (all
those who are paying premiums to the insurer). There are two
main types of insurance.
 Casualty, where there is no certainty that that the thing
insured will occur. Common forms of casualty insurance
are against accidents (in cars or boats or planes), against
damage to buildings and against sickness.
 Life, where the thing insured against is certain to occur:
the death of the insured. The only uncertainty is when.
This sort of insurance is usually referred to as life
assurance because the event is assured of happening.
Life assurance was traditionally sold directly by sales people
to customers in their homes, Casualty was normally sold by
agents, who matched a customer’s needs with insurance poli-
cies available on the market. Both are now increasingly sold
direct (by telephone) or via the internet.
When the praying does no good, insurance does help.
Bertolt Brecht