The Investment Performance of the Common Stock Portfolios of Property-Liability Insurance Companies

This paper has examined the investment performance of the common stock portfolios of 20 property-liability insurance companies over the period 1958–1967. The performance of these portfolios was compared with the performance of both equal-weighted and value-weighted random portfolios of common stocks. The evidence indicated that the returns earned by the insurance companies were significantly lower than the returns earned by random portfolios of equivalent risk.While this study is not precisely comparable to the previously published studies of mutual funds in terms of either the methodology employed or the time period considered, the results are quite similar. An additional group of institutional investors can be seen not to have outperformed the “market.†The presumption of inferior performance is even stronger in the case of the property-liability companies because all the comparisons in this study were made on a gross basis. Most of the studies of mutual fund performance have compared fund returns net of investment expenses to the gross returns from random investments. In those instances where comparisons were made on a gross basis, the performance of fund portfolios was found to be very similar to the performance of random investments.