Determinants of Cash Holdings by Property-Liability Insurers

Colquitt, L. Lee; Sommer, David W.; Godwin, Norman H.

doi:10.2307/253554

Cited by 43 publications

(55 citation statements)

References 27 publications

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“…The mutual variable has a significant negative sign, showing that stock insurers tend to demonstrate better performance than mutuals. The result is consistent with the argument that mutual managers are not well monitored in capital markets as compared to mangers of stock insurers and thus, the pressure to maximize firm value is far less in a mutual firm (Colquitt et al 1999). An unaffiliated single firm indicator is positive and significant, implying that an unaffiliated company is likely to be more risk averse and managers of unaffiliated firms may have more incentive to minimize costs and maximize revenues than those of affiliated insurance groups.…”

Section: Resultssupporting

confidence: 87%

Mergers & Acquisitions, Diversification and Performance in the U.S. Property-Liability Insurance Industry

Shim

2010

J Financ Serv Res

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This paper examines the relationship between mergers & acquisitions (M & As), diversification and financial performance in the U.S. property-liability insurance industry over the period 1989-2004. The risk-adjusted return on assets (ROA), return on equity (ROE), Z-score and total risk measured by earnings volatility are considered as a relevant indicator of performance. We find that acquirers' financial performance decreases and earnings volatility increases during the gestation period after the M & As perhaps due to increased frictional costs associated with post-merger integration and agency problems. We find that more focused insurers outperform the product-diversified insurers, implying that the costs of diversification outweigh the benefits. These findings are robust to alternative risk and diversification measures. We also find that marginal increases in commercial line share are associated with higher risk-adjusted profits, but these gains are offset by the extra costs from product diversity when its initial share is low. For insurers initially concentrated in commercial line, a marginal increase in commercial line share is related to higher performance due to positive effects of both direct exposure and indirect focus.

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Section: Resultssupporting

confidence: 87%

Mergers & Acquisitions, Diversification and Performance in the U.S. Property-Liability Insurance Industry

Shim

2010

J Financ Serv Res

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“…Indeed, Cummins and Sommer (1996) report a positive relation between a P-L insurer's capital and an aggregate risk proxy reflecting both underwriting and investment risks. Following prior studies (e.g., Cummins and Sommer 1996;Colquitt et al 1999), we define a firm's capital ratio as the ratio of total surplus to total book value of assets. We expect the coefficient of capital ratio to be a positive sign in both underwriting and investment risk equations.…”

Section: Capital Ratiomentioning

confidence: 99%

Underwriting and investment risks in the property-liability insurance industry: evidence prior to the 9–11 event

Zou

Wen

Yang

et al. 2010

Rev Quant Finan Acc

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Underwriting and investment are two important and related business activities of insurance companies. However, studies on the interrelation between underwriting and investment risks of Property-Liability (P-L) insurance companies are sparse in the literature. Using a sample of US P-L insurers, this article conducts an empirical investigation of how these two risks are associated with each other in the 1994-2000 period (before the September 11th terrorist attack in 2001). Our results, robust to various estimations, suggest that there is no significant relationship between the underwriting and investment risks among our sample firms. Such results based on pre 9-11 event period provide some support for the conjecture of Achleitner et al. (Geneva Pap Risk Insur Issues Pract 27:275-282, 2002) that many insurance companies may have failed to take an integrated approach to risk management. This resulted in a heavy loss due to dual exposures in both underwriting and investment in the 9-11 event. In the aftermath of the recent global financial crisis, risk taking and risk management of financial institutions have received more attention and increasing scrutiny. We believe the current paper provides some useful insights in this vein.

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“…16 The claim ratio of liability lines and the claim ratio of property lines (Lia_claim and Property_claim) are included in the regression model to control the influence of various claim settlement patterns. These two claim ratios are defined as the claims of 12 John (1993); Kim et al (1998); Colquitt et al (1999);Ferreira and Vilela (2004); Ozkan and Ozkan (2004); Kalcheva and Lins (2007). 13 de Haan (1997); Ees et al (1998);Faulkender (2002);Panno (2003).…”

mentioning

confidence: 99%

“…19 Similar to the geographic Herfindahl index, the business Herfindahl index is defined as the sum of the squares of the ratio of the dollar amount of direct business written in a particular line of insurance to the dollar amount of direct business across all 26 lines of insurance. 20 Colquitt et al (1999);Shiu (2006). 21 Colquitt et al (1999).…”

mentioning

confidence: 99%

Quantile Regression Analysis of Corporate Liquidity: Evidence from the U.S. Property–Liability Insurance Industry

Chang

Tsai

2013

Geneva Pap Risk Insur Issues Pract

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This study analyses the determinants of corporate liquidity for the U.S. property-liability insurance industry from 2006 to 2010. Unlike previous studies using the ordinary least squares (OLS) approach, this study applies the quantile regression (QR) method. The QR method provides further insights on how insurers' liquidity level is determined, especially for the firms at the lower and the higher quantiles. We found that leverage and organisational structure have opposite effects on insurers' liquidity in the lower and the higher quantile groups. The empirical results also show that most firm-specific characteristics and macroeconomic conditions influence the insurers' liquidity, which are consistent with the findings of the OLS approach in previous studies.

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Determinants of Cash Holdings by Property-Liability Insurers

Cited by 43 publications

References 27 publications

Mergers & Acquisitions, Diversification and Performance in the U.S. Property-Liability Insurance Industry

Mergers & Acquisitions, Diversification and Performance in the U.S. Property-Liability Insurance Industry

Underwriting and investment risks in the property-liability insurance industry: evidence prior to the 9–11 event

Quantile Regression Analysis of Corporate Liquidity: Evidence from the U.S. Property–Liability Insurance Industry

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