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- Title
Short Term Risk-Return Impact of the Holding Company Movement.
- Authors
Dukes, William P.; Lilly, Claude C.
- Abstract
This article presents a study which focused on the performance aspect of the insurance holding company movement. In 1967, a trend began toward the formation of insurance holding companies. Weekly prices and dividends, when paid, were examined for nineteen insurance holding companies and each major related insurer in an attempt to determine whether there was a significant difference in returns of the insurers and related insurance holding companies and whether any difference can be attributed to a change in market risk. Of the insurance holding companies studied, all of the property and liability and ten of the life insurers showed a higher return. Of these insurance holding companies providing superior performance, three of the property and liability insurers had increased market risk and five of the life insurers had higher market risk when measured by traditional risk-return relationships. After an adjustment was made for changing market risk, however, the superior performance of the insurance holding companies remained the same. The findings indicate that for the available sample of nineteen insurers there was no reduction in risk in general by the holding company formation, but that there was a significant improvement in performance, as measured by excess return or risk adjusted excess return, that did accompany formation of holding companies. In general, an increase in market risk was compensated for by an increase in return even though the fit is not precise.
- Subjects
INSURANCE holding companies; ECONOMIC trends; RISK; PRICES; DIVIDENDS
- Publication
Journal of Risk & Insurance, 1977, Vol 44, Issue 2, p320
- ISSN
0022-4367
- Publication type
Article
- DOI
10.2307/252145