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Determinants of United Kingdom General Insurance Company Performance

Published online by Cambridge University Press:  10 June 2011

Y. Shiu
Y. Shiu
Affiliation:
Department of Finance, Tunghai University, 181, Sec. 3, Taichung-Kan Rd, Taichung, Taiwan. Tel: +886-(0)4-2359-0121 ext. 3540; Fax: +886-(0)4-2350-6835; Email: [email protected]
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Abstract

Dynamic financial analysis has become one of the important tools that actuaries use to model the underwriting and investment operations of insurance companies. The first step in carrying out the analysis is to investigate the most important factors affecting company performance. This paper identifies the determinants of the performance of United Kingdom general insurance companies using a panel data set consisting of economic data and Financial Services Authority/Department of Trade and Industry returns over the period 1986 to 1999. Three performance measures are used to capture different aspects of insurance operations. These measures are related to a number of economic and firm specific variables, chosen on the basis of relevant theory and literature. An ordinary least squares regression model and two panel data models are estimated for each of three performance measures. This paper also addresses several important econometric problems that are usually ignored in applied work in the context of panel data analysis. Based on the empirical results, this study finds that liquidity, unexpected inflation, interest rate level and underwriting profits are statistically significant determinants of the performance of U.K. general insurers.

Keywords

Dynamic Financial AnalysisPerformance DeterminantsGeneral InsurersPanel Data Analysis
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 10 , Issue 5 , 01 December 2004 , pp. 1079 - 1110
Copyright
Copyright © Institute and Faculty of Actuaries 2004

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