Life Insurer Financial Distress, Best's Ratings and Financial Ratios

This study compares the predictive ability of: (1) ratings, ratings changes and total assets; (2) financial ratios; and (3) financial ratios combined with ratings and rating changes on a sample of forty-eight insolvent life insurers over the period 1990 to 1992. Based on the expected cost of misclas...

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Bibliographic Details
Published inThe Journal of risk and insurance Vol. 65; no. 2; pp. 275 - 288
Main Author Pottier, Steven W.
Format Journal Article
LanguageEnglish
Published Malvern American Risk and Insurance Association 01.06.1998
Blackwell Publishing Ltd
Subjects
Capital costs
Changes
Chi-square test
Comparative analysis
Cost estimation models
Costs
Credit ratings
Efficiency
Financial ratios
Hypotheses
Insolvency
Insurance industry
Insurance providers
Liability insurance
Life insurance
Population
Property liability insurance
Ratings & rankings
Ratios
Regression analysis
reliability
risk aversion
Solvency
Studies
Variable costs
Variables
United States > US
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Summary:This study compares the predictive ability of: (1) ratings, ratings changes and total assets; (2) financial ratios; and (3) financial ratios combined with ratings and rating changes on a sample of forty-eight insolvent life insurers over the period 1990 to 1992. Based on the expected cost of misclassification, ratings, rating changes and total assets have comparable predictive ability to financial ratios combined with ratings and rating changes. However, combining ratings and rating changes with financial ratios improves predictive ability compared to financial ratios alone for most cost ratios. Another interesting finding is that adverse rating changes are important predictors of insolvency.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0022-4367
1539-6975
DOI:10.2307/253536