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Composite Performance Variable and the Characteristics of Life Insurance Companies

  • Journal of Insurance and Finance
  • 2004, 15(1), pp.3-28
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

Jung SeChang 1

1홍익대학교

Candidate

ABSTRACT

The purpose of this paper is to develop the composite performance variable which reflects the performance of life insurance companies objectively, scientifically, and also specifically. The insurance companies are classified on the basis of the composite performance developed and the characteristics of insurance companies explaining high and low composite performance are also analysed. The composite performance variable is measured by the mixture of cost efficiency, profitability, and financial soundness. The principal component analysis is employed in measuring the composite performance variable.The findings of this paper are summarized as follows. Firstly, the composite performance variable is more appropriate for the performance of insurance companies than a single performance variable such as cost efficiency, profitability, or financial soundness. Secondly, we observe major and some foreign life insurance companies showing high composite performance. On the contrary, small and medium sized companies and the other foreign life insurance companies exhibit low composite performance. Finally, size and the bond ratio reflecting the characteristic of investment portfolio influence the composite performance positively but the protection ratio is negatively related to the composite performance.

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