ارزش نهادن به گزینه استراتژیک برای فروش کسب و کار بیمه عمر: تئوری و شواهد

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.

Recent years have witnessed a large-scale increase in the world-wide consolidation of financial services (Berger et al., 1999). Merton and Perold (1993) claim that these trends highlight the importance of management’s strategic ability to exit from existing businesses, particularly for life insurance firms since they have long-term fixed liabilities. It has also led to increased demands by capital market participants for the public disclosure of the fair value of the assets and liabilities of life insurance firms. Barth and Landsman (1995) define fair value as the amount at which an asset could be exchanged in a current transaction between willing parties. Vanderhoof (1998) notes that although accountants, actuaries, regulators and analysts generally agree that the fair value of assets can be taken at market value, estimating the corresponding fair value of liabilities is far more problematic. In the actual marketplace, which is characterized by change, uncertainty and competitive interactions, management may have valuable flexibility to alter its initial operating strategy in order to capitalize on favourable opportunities or to react so as to mitigate losses. Trigeorgis (1996) links this managerial operating flexibility to financial options. Thus, viewing life insurance funds as containing a put option, the liabilities play the role of the exercise price while the fund assets plus shareholder expectations of future profits on selling policies (the spread) play the role of the underlying asset or stock price.2Upton (1997) claims that option values are also potentially relevant to the fair valuation of life insurance firms. This paper estimates management’s put option to sell life insurance business as a separate component of life insurance firm fair value in Babbel and Staking’s (1995) asset–liability model that distinguishes accounting and actuarial valuation elements. This calculation is potentially value-relevant to various decision-makers since an asset–liability valuation approach has recently been endorsed by the International Accounting Standard Committee (1999) as a basis for developing a uniform set of accounting principles for life insurance that is acceptable to both regulators and investors world-wide. The put value is based on a standard Merton (1973) two-variable, put option pricing model which Marcus (1985) extended to include a pension firm's termination option. We show that this asset–liability valuation model yields an estimate of the put option value of a life insurance business, which is terminated only when that action is optimal for the firm. The put option values derived allow for the calculation of fair value-based measures of capital in which the termination decision of a stock-based life insurance firm is determined endogenously under various operating conditions.3 The form and content implications of the put option prices for the strategic decision to sell life insurance business is empirically investigated by utilising liability, asset and return data of a sample of Australian life insurance companies, during a period of significant industry consolidation in 1987–1990. Consistent with our expectations, the calculated put option values are strongly associated with the termination decision facing the sample of firms, even after controlling for other explanatory variables. The intrinsic value of life insurance business, calculated as the market value of assets adjusted for the voluntary termination put option value, is also used to evaluate the relative effectiveness of accounting-based and actuarial-based capital measures under alternative static and dynamic-based models of solvency for continuing firms. Consistent with our predictions, we find that accounting-based measures of capital are more strongly associated with intrinsic value under a static solvency testing model, while actuarial-based measures of capital are more strongly associated with intrinsic value under a dynamic solvency testing model. These results lend empirical support to the asset–liability valuation model as a valid basis for developing international accounting principles for life insurance firms. The rest of this paper is organised as follows. Section 2 provides the theoretical and institutional background to the study. Section 3 describes the empirical framework for the study. Section 4 describes the sample, key variables and empirical estimates of the put option values for a sample of Australian life insurance companies. Section 5 discusses the results of tests of the strength of association between the put option value and other (accounting and actuarial) elements that comprise the fair value of the life insurance firm. Finally, Section 6 provides summary and conclusion.

This paper estimates components of the fair value of financial services firms that represent options to voluntarily sell their life insurance businesses. These put options were strategically valuable for managers of at least some Australian life insurance firms during the early 1990s, a period featured by insolvency, extensive competition and subsequent political threats to discriminate against foreign-owned life insurance firms. Empirical estimates of put option values and other components of life insurance firm value are calculated for a sample of 24 continuing and 11 terminating Australian life insurers during the period 1988–1996, a period of intense product competition and industry rationalisation leading to consolidation and recovery. The put option values appear to be robust to various sensitivity tests, which demonstrate that put option values distinguish between the samples of terminating and non-terminating firms and are associated with other components of the fair value of life insurance businesses. The put options values, when incorporated into a broader valuation model of financial institutions to calculate the intrinsic value of equity, can be used as a benchmark to assess the effectiveness of alternative static and dynamic solvency test models. However the effectiveness of these models are sensitive to the use of accounting or actuarial-based capital measures of the fair value of life insurance businesses. The International Accounting Standards Committee, in developing a new accounting standard for life insurance contracts, is currently considering both measures. The empirical results suggest that the IASC should require life insurance firms to report both measures under the new accounting standards. The empirical results also have broader implications for management. The option of firms to voluntarily sell funds is potentially important, and appears to provide management with a valuable decision tool to evaluate their option to terminate or acquire life insurance business. Since the models are relatively easy to calculate on the basis of publicly available information and as the accounting academic and professional community gradually comes to be more familiar with them, we expect that these estimates will gradually come into greater use. The analysis presented in this paper can be extended in a number of dimensions. First, the put option values can be used to provide reliable estimates of the valuable option to terminate investment in life insurance companies and other kinds of financial intermediary which have fixed redeemable contingent liabilities. Second, when used in conjunction with a model of risk capital developed by Merton and Perold (1993), this analysis can be applied to analyse the financing, capital budgeting and risk-management decisions of other types financial services firms. More research is needed to validate these results for other samples of life insurance firms, other kinds of financial service firms, and in other institutional settings.