IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Do Life Insurers' Asset Allocation Strategies Influence Performance within the Enterprise Risk Framework?

Listed author(s):
  • Etti G Baranoff

    (School of Business, Virginia Commonwealth University, Snead Hall, 301 West Main Street, Richmond, VA 23284-4000, U.S.A)

  • Thomas W Sager

    (Department of Information, Risk, and Operations Management, The University of Texas at Austin, CBA 5.202, Austin, TX 78712-1175, U.S.A.)

Registered author(s):

    In this paper we examine the impact of asset allocation strategies on the investment performance of life insurers in the U.S. We are especially interested in comparing the effects of active portfolio management to the effects of passive holding strategies. We define three novel quantitative indices of static/dynamic strategies to represent important dimensions of the active/passive spectrum of investment strategies. The indices are computed from portfolio allocations reported in the firms’ annual statement data. Using cluster analysis, we partition the population of life insurers into three groups, characterised by generally having static (passive), dynamic (active) and mixed asset allocation strategies, respectively. There are major differences among the three clusters in terms of risk profile, size and other factors. We model investment performance and allocations among the major holdings of bonds, stocks, cash and mortgages explicitly as simultaneously interacting phenomena. In order to isolate the effect of allocation strategies from the confounding effects of other risks, we imbed a spectrum of enterprise risks, treated as exogenous or predetermined, within the model framework of endogenously interacting performance and asset allocation variables. The strategy indicators are also exogenous variables. We find that the most active cluster enjoys the greatest relative performance, even controlling for allocations among asset classes. The Geneva Papers (2009) 34, 242–259. doi:10.1057/gpp.2009.5

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Palgrave Macmillan & The Geneva Association in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

    Volume (Year): 34 (2009)
    Issue (Month): 2 (April)
    Pages: 242-259

    in new window

    Handle: RePEc:pal:gpprii:v:34:y:2009:i:2:p:242-259
    Contact details of provider: Web page:


    Route de Malagnou 53, CH - 1208 Geneva

    Phone: +41-22 707 66 00
    Fax: +41-22 736 75 36
    Web page:

    More information through EDIRC

    Order Information: Web:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:34:y:2009:i:2:p:242-259. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Rebekah McClure)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.