Abstract

http://ssrn.com/abstract=771765
 
 

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The Insurance Performance Measure: Bringing Value to the Insurance Industry


Joseph Calandro Jr.


Fordham University - Gabelli Center for Global Security Analysis

Scott Lane


Quinnipiac University


Journal of Applied Corporate Finance, Vol. 14, No. 4, pp. 94-99, 2002

Abstract:     
The performance of the property and casualty (P&C) insurance industry has suffered in past years. Part of the industry's difficulties stems from its focus on premium generation, as measured by the combined or underwriting ratio, at the expense of overall operational performance. In this regard, the underwriting ratio is an incomplete measure of operating performance since it ignores two critical P&C operational functions: the investment return and reinsurance results.

In this paper we present the Insurance Performance Measure (IPM), a comprehensive performance metric for the P&C industry. The IPM captures the three critical operational functions mentioned above in an overall performance measure. The measure is versatile in that it can be easily decomposed into critical value drivers in each area of operation. Thus, the IPM framework enables P&C managers to observe the interaction and trade-offs between the operational functions of premium generation, investment return and reinsurance results separately or as a group, and as they relate to the opportunity cost of policyholders' surplus.

Number of Pages in PDF File: 6

Keywords: insurance, economic profit, value based management

JEL Classification: G22, G30, M21

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Date posted: August 10, 2005  

Suggested Citation

Calandro, Joseph and Lane, Scott, The Insurance Performance Measure: Bringing Value to the Insurance Industry. Journal of Applied Corporate Finance, Vol. 14, No. 4, pp. 94-99, 2002. Available at SSRN: http://ssrn.com/abstract=771765

Contact Information

Joseph Calandro Jr. (Contact Author)
Fordham University - Gabelli Center for Global Security Analysis ( email )
531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States
HOME PAGE: http://www.linkedin.com/in/josephcalandro/
Scott Lane
Quinnipiac University ( email )
Mount Carmel Ave
Hamden, CT
United States
(203) 582-8367 (Phone)
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