Equity and dividends receive a great deal of attention from investors and analysts when looking at insurance companies. But why is this? Well, insurance regulations stipulate a minimum amount of equity that must be held by an insurance company. However, other than these capital requirements, the business of insurance is not particularly capital intensive, since it's the policy holders, which in effect provide the funding that generate the underwriting and investment profits. This allows surplus profits and cash to be paid as dividends as long as the regulatory requirements are met. Since life insurance companies are typically very stable, profitable, and cash generative businesses, investors closely monitor dividend and equity ratios as performance metrics. Now, the key dividend ratio that is monitored is the dividend per share metric. And that's the dividends paid and proposed for the year, divided by the weighted average number of shares in issue. Now, investors take a keen interest in both this absolute metric, but also the growth in it over time, so the growth rate in dividends per share. Now, in terms of the key equity metric that's tracked by investors, that's the regulatory capital ratio. So that's the amount of equity or available capital versus the amount that's required by the regulators. Now, typically investors are keen to see that there is a good balance between capital efficiency and maintaining an adequate buffer in case of economic shock to profits. But what do I mean by capital efficiency? Well, that means ensuring that the equity that's retained by the business is appropriately invested to grow the business and generate a good return for the investors, rather than just sitting on surplus capital for the sake of it. Insurance companies in Europe are covered by Solvency II regulations, which require a minimum capital ratio of 100%. However, most insurance companies target a ratio well in excess of this, usually above 150%, just to ensure they have got a bit of a buffer in case of shocks to profits.