An analysis on the operating returns of insurers's expansion into loan business of banking

• Main Authors: Yu-Wen Ni, 倪郁雯
• Other Authors: Yao-tung Chen
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/29473704949952875588

碩士 === 朝陽科技大學 === 保險金融管理系碩士班 === 91 === Abstract Recent literatures have found that bankers can improve their risk-return profile from expanding business into insurance, but they offers no guidance on whether insurers might also benefit from adding banking products. Based on Schellhorn and Scordis（2002）, we investigate whether insurers in Taiwan can improve their operating risk-return profile by adding commercial loans, a banking product, into the traditional insurance product portfolio. We also investigate whether insurance regulation 146-3 would influence insurers’ optimal proportion of loan business. Different from previous studies adopting a banking firm’s perspective in examining the effect of combination on the return on equity (ROE) or on the return on assets (ROA)，our study used product-level data rather than firm-level or industry-level data to examine the potential diversification benefits. Using individual product data from 1986 through 2001 in Taiwan, we construct insurance-only portfolio of products and insurance-banking portfolio of products respectively to analyze the operating returns and the standard deviations of insurers’ expansion into banking. We also examine the impact of an expansion into banking on the risk-return profiles of two representative insurance companies（A and B）, we add commercial loans to the actual product portfolios of A and B. Our results show that insurance-banking portfolio of products is unlikely to outperform insurance-only portfolio of products. The insurers can improve their operating risk-return profile by offering selected insurance products. Existing insurance regulation 146-3 doesn’t put a limit on insurers’ optimal proportion of loan business. keywords: bancassurance, risk, return, sharpe ratio