Wealth Effects of Banks' Rights to Market and Originate Annuities

Expansion and consolidation of bancassurance in the 21st century

“…Third, the cost savings proxy is significant and positively related to the size of the bancassurance operation. This indicates that cost benefits are a key determinant of bancassurance, in line with the results of Canals (1998), and Cowan et al (2002). By utilising bancassurance operations, banks can share existing costs with the new operation while also being able to produce and sell cost-effective products.…”

“…The multitude of researchers such as Cowan et al (2002) agree that there would be a positive relationship between this proxy and our dependent, meaning that as the bancassurance operation grows, the expenses generated by each new output 4 should be proportionately less. Canals (1998) argues that one of the advantages of universal banks is the economies of scope they create by allowing costs to be shared amongst different business units.…”

“…A large number of previous studies on the blossoming bancassurance markets have only been descriptive in nature, providing broad insight into reasons believed to be behind the success of this venture, and potential benefits and disadvantages for all associated parties. However, only a few researchers, such as Carow (2001a,b), Estrella (2001) and Cowan et al (2002) have provided quantitative findings, and most of these studies focused mainly on the potential risk diversification benefits associated with bank expansion into the insurance industry. It can be argued that the lack of quantitative studies results from a lack of available data regarding bancassurance operations.…”

An event study analysis of international ventures between banks and insurance firms

“…On the other hand, Carow and Kane (2002) conclude that the abolition of barriers may have redistributed rather than created value for the institutions involved. Cowan et al (2002) show that insurance companies had positive abnormal returns at the time of court rulings that hinged the expansion of banks into the annuities business, and negative abnormal returns at the subsequent reversal of those rulings. In a similar vein, Lown et al (2000) conclude that bank's interface with security firms and P/C insurers would raise risk, while mergers with life insurers lower the risk of both firms.…”

“…They are always cautious when it comes to insurance and sales of related products, but paradoxically they seem to value more their relationship with the bank. Cowan et al (2002) examine four court rulings in the U.S. and find that restricting banks from insurance products triggers negative stock price reactions.…”