Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Valuing the strategic option to sell life insurance business
T2 - Theory and evidence
AU - Klumpes, Paul J.M.
AU - Shackleton, Mark B.
PY - 2000/10/1
Y1 - 2000/10/1
N2 - We present a simple put option pricing procedure within an asset-liability valuation model that can be used to estimate the incentives facing stock-based life insurance firms to voluntarily sell their businesses under various operating and regulatory conditions. Estimates are derived for samples of 11 sold firms and 24 continuing Australian life insurance companies over a period of industry consolidation. The put option values interact with other actuarial and accounting components of the fair value of these life insurance firms and are used to assess the effectiveness of accounting and actuarial measures of capital, under static or dynamic based solvency testing models.
AB - We present a simple put option pricing procedure within an asset-liability valuation model that can be used to estimate the incentives facing stock-based life insurance firms to voluntarily sell their businesses under various operating and regulatory conditions. Estimates are derived for samples of 11 sold firms and 24 continuing Australian life insurance companies over a period of industry consolidation. The put option values interact with other actuarial and accounting components of the fair value of these life insurance firms and are used to assess the effectiveness of accounting and actuarial measures of capital, under static or dynamic based solvency testing models.
KW - G22
KW - Life insurance
KW - Solvency testing
KW - Termination put option
U2 - 10.1016/S0378-4266(00)00097-2
DO - 10.1016/S0378-4266(00)00097-2
M3 - Journal article
AN - SCOPUS:0043209393
VL - 24
SP - 1681
EP - 1702
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 10
ER -