Performance of Property and Casualty Insurance Through United States Recession

Open Access
Author:
Cheng, Caleb
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Louis Gattis Jr., Thesis Supervisor
  • BRIAN SPANGLER DAVIS, Honors Advisor
  • Edward Eugene Babcock Jr., Faculty Reader
Keywords:
  • Insurance
  • Recession
  • Property and Casualty Insurance
Abstract:
This paper analyzes the performance of property and casualty insurers during periods of major U.S. recessions. An industry overview is presented to provide historical context to the insurance space – a sector that has had little change in over 200 years. The research considers the performance of 15 domestic property and casualty insurance carriers that offer wide-ranging insurance products. To isolate operational differences between insurance companies of varying scale, the research categorizes three peer groups by total admitted assets. Specifically, the study examines collective performance of insurers since 2000 through the lens of financial data, such as revenue, investment income, net income, and stock price. Correlation analysis between several performance metrics and economic indicators was used to gauge the strength and direction of relationships during recession. Cross sectional regression analysis was conducted to help understand the relationships between many variables affecting company performance during recession. The analysis considers the role of leverage, underwriting performance, and investment performance as key influencers of profitability during periods of recession. Additionally, the paper characterizes the relationship between the fixed income market and insurer performance by comparing the returns of a synthetic fixed income portfolio and insurers’ stock price.