TITLE
"Risk and Portfolio Returns for Life Insurance Stocks in
Bull and Bear Markets," Journal
of Insurance Issues, Gay B. Hatfield
and Jian Guo Chen. Spring 1997, Vol. XX, No. 1, pp. 67-83.
ABSTRACT
IDS Financial Services (1990) stated its belief that 20 percent of current life insurers
could become insolvent should a major economic downturn occur. This study examines the
risk-adjusted return performance and systematic risk change (as measured by a firms
beta) of life insurance companies across various market conditions between 1973 and 1994.
The results indicate that investors in life insurance company stocks earned positive
risk-adjusted returns during the study time period, historically outperforming the market
on a risk-adjusted basis. The systematic risk of life insurance stocks in a bear market is
not statistically different from the markets risk level, and, moreover, the
firms risk level in a bull market is significantly less than in a bear market. In
the most recent sub-period that we test (19901994), a life insurance firms
systematic risk level is significantly greater than that of the market; therefore, these
firms may be more sensitive to general market conditions than they formerly were.
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