Tax management and investment strategies of property-liability insurers

Cummins, J. David; Grace, Elizabeth

doi:10.1016/0378-4266(94)00078-6

Cited by 50 publications

(28 citation statements)

References 15 publications

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“…10 In certain jurisdictions (eg, the US), the mix of assets held by an insurance company may be influenced by differential taxation rules pertaining to invested assets (Cummins & Grace 1994). 11 With unit-linked life insurance policies, premiums are invested in funds selected by the policyholder at the time the policy is written.…”

Section: Liability-mixmentioning

confidence: 99%

“…Introduction I nvestment earnings made by insurance firms make a valuable contribution to their operating results and enable them to reduce premiums and increase dividends and bonuses, thereby improving their competitiveness 1 (Oppenheimer & Schlarbaum 1983;Smith 1989;Cummins & Grace 1994;Citibank 1994). The financial economics literature suggests that contracting incentives for managers to increase investment earnings are dependent upon firm-specific factors such as organisational form and firm size.…”

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confidence: 99%

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Investment Earnings and the Characteristics of Life Insurance Firms: New Zealand Evidence

Adams

1996

Australian Journal of Management

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This study examines the relationship between the investment earnings of life insurance firms in New Zealand and their organisational characteristics. Using data for the period 1988-1993, a pooled Weighted Least Squares regression model is estimated. Consistent with expectations, the empirical results indicate that investment earnings were higher for stock companies than for mutuals. They were also positively associated with the size, leverage and underwriting risk of life insurance firms. Life insurance firms holding proportionately more financial than non-financial assets have low investment yields. The liability structure of life insurance firms was unrelated to their investment earnings.

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Section: Liability-mixmentioning

confidence: 99%

mentioning

confidence: 99%

Investment Earnings and the Characteristics of Life Insurance Firms: New Zealand Evidence

Adams

1996

Australian Journal of Management

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“…To the extent that the bankruptcy state-or any set of specific states-is associated with a discrete increase in costs, the firm will be forced to recognize this fact in its 2 Evidence on this point for the insurance industry is provided by Cummins and Grace (1994) and Lamm-Tennant and Rollins (1994). .._..…”

Section: The Cost Of Financial Distressmentioning

confidence: 99%

Financial Risk Management by Insurers: An Analysis of the Process

Cohen¹,

Cox²,

Gaver³

et al. 1997

The Journal of Risk and Insurance

146

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On-site visits to financial service firms were conducted to review and evaluate their risk management systems. In the insurance sector, this evaluation covered prominent life/health and property-liability insurers, both in the United States and abroad. The information obtained covered both the philosophy and the practice of financial risk management. This article outines the results of this investigation. It reports the state of risk management techniques in the industry. It reports the standard of practice and evaluates how and why it is conducted in the particular way chosen. In addition, critiques are offered where appropriate. We discuss the problems which the industry finds most difficult to address, shortcomings of the current methodology used to analyze risk, and the elements that are missing in the current procedures of risk managment.The past decade has seen a dramatic rise in the number of insolvent insurers. The ostensible causes of these insolvencies were myriad. Some of the insolvencies were precipitated by rapidly rising or declining interest rates. Others resulted from losses on assets such as junk bonds, commercial mortgages, collateralized mortgage obligations, real estate, and derivatives.Mispricing of insurance policies, natural catastrophes, and changes in legal interpretations of liability and the limits of coverage hurt still others. The "churning" of policies by unscrupulous sales agents, insolvencies among the reinsurers backing the policies issued, noncompliance with insurance regulation, and malfeasance on the part of officers and directors of the insurance companies affected some as well. But despite the numerous and disparate apparent causes of these insolvencies, the underlying factor in all of them was the same: inadequate risk management practices. In response to this, insurers almost universally have embarked upon an upgrading of their financial risk

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“…The management of corporate taxes has been examined in the banking industry (e.g., Scholes et al, 1990;Beatty et al, 1995;Chen and Daley, 1996) and in the insurance industry (e.g., Grace, 1990;Petroni, 1992;Cummins and Grace, 1994). Research in the United States (US) property-liability insurance industry (e.g., Petroni andShackelford, 1995, 1999;Derrig and Ostaszewski, 1997;Gaver and Paterson, 1999;Ke et al, 2000;Petroni et al, 2000) suggests that managers can manage corporate taxes and/or meet regulatory capital (solvency) requirements through reserving and asset-liability management.…”

Section: Introductionmentioning

confidence: 98%