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- Title
Leverage, Exposure Ratios and the Optimal Rate of Return on Capital for the Insurer.
- Authors
Roy, Tapan S.; Witt, Robert Charles
- Abstract
ABSTRACT The impact o[ insurance leverage on equity return for property and liability insurers is examined. Two financial models are developed to determine the exposure ratio and associated ° of insurance leverage to maximize the rate of return on insurance stockholder's equity. The optimal ° of insurance leverage is determined by the exposure ratio or quantity of sales which maximizes the rate of return on equity under the financial models specified herein. Accordingly, this study focuses on the use of reserves as a leverage source and attempts to establish a concept of optimal insurance leverage under certain specified conditions.
- Subjects
RATE of return; CAPITAL; FINANCIAL leverage; STOCKHOLDERS equity; INSURANCE companies; INSURANCE stocks
- Publication
Journal of Risk & Insurance, 1976, Vol 43, Issue 1, p53
- ISSN
0022-4367
- Publication type
Article
- DOI
10.2307/251609