Andre P. Liebenberg
Country: United States
Affiliation: Faculty, Department of Finance, School of Business Administration, University of Mississippi
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Decomposing diversification effect: evidence from the U.S. property-liability insurance industry
Xin Che , Andre P. Liebenberg , Ivonne A. Liebenberg , Lawrence S. Powell doi: http://dx.doi.org/10.21511/ins.08(1).2017.02Insurance Markets and Companies Volume 8, 2017 Issue #1 pp. 16-28
Views: 1350 Downloads: 328 TO CITE АНОТАЦІЯPrior literature suggests that diversified property-liability (P/L) insurers underperform their focused counterparts. While most studies focus on insurers’ overall performance, there is an absence of evidence regarding whether the underperformance is driven by underwriting or investment profitability. The authors develop and test hypotheses of diversification’s separate effect on underwriting and investing in the U.S. property-liability (P/L) insurance industry. It is found that diversified insurers outperform their focused counterparts in terms of investment return, but that they underperform in terms of underwriting profitability. The results are robust to corrections for endogeneity bias and a matched sample analysis.