The Interplay between U.S. Economic Indicators and Insurance Firm Financial Health

Q3 Economics, Econometrics and Finance

Afro-Asian Journal of Finance and Accounting Pub Date : 2023-08-18 DOI:10.53819/81018102t4185

Eugene W Fench

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Abstract

This study examined the relationship between U.S. economic indicators and the financial health of insurance firms over a decade, from 2010 to 2020. Utilizing a quantitative research approach, data was collected from top insurance companies, juxtaposed against macroeconomic indicators like GDP growth, inflation rate, interest rate, and unemployment rate. Through regression analysis, the study revealed significant correlations between these macroeconomic variables and insurance firms' profitability, solvency, and liquidity metrics. The results indicated that GDP growth was positively correlated with insurance firms' profitability, suggesting that in periods of economic expansion, insurance firms tend to be more profitable. In contrast, inflation rate showed a negative relationship with solvency ratios, pointing to the strain of rising costs on the firms' ability to meet long-term obligations. Interest rates were found to significantly affect the liquidity of insurance firms, where higher rates led to decreased liquidity, likely due to increased costs of borrowing and alterations in the value of rate-sensitive assets and liabilities. Lastly, unemployment rates were negatively correlated with insurance firms' premium collections, implying lower policy underwriting during times of higher joblessness. Moreover, while the interrelationships were evident, the degree of sensitivity varied across firms, with larger insurance providers appearing to be more resilient to macroeconomic fluctuations than their smaller counterparts. The study concluded that while insurance companies are inherently influenced by broader economic trends, the extent of their vulnerability or resilience is also determined by firm-specific factors like size, asset management strategies, and product diversification. The findings underscore the need for proactive management strategies for insurance firms in navigating the ever-shifting economic landscape. Keywords: U.S. Economic Indicators, Insurance Firm Profitability, Macroeconomic Fluctuations, Financial Health, Solvency Ratios

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美国经济指标与保险公司财务状况之间的相互作用

本研究考察了从2010年到2020年十年间美国经济指标与保险公司财务健康状况之间的关系。利用定量研究方法，从顶级保险公司收集数据，并将其与GDP增长、通货膨胀率、利率和失业率等宏观经济指标并列。通过回归分析，研究发现这些宏观经济变量与保险公司的盈利能力、偿付能力和流动性指标之间存在显著的相关性。结果表明，GDP增长与保险公司的盈利能力正相关，表明在经济扩张时期，保险公司往往更有利可图。相比之下，通货膨胀率与偿债能力比率呈负相关，这表明成本上升对企业履行长期债务的能力造成了压力。研究发现，利率对保险公司的流动性有显著影响，较高的利率导致流动性下降，这可能是由于借贷成本增加以及对利率敏感的资产和负债价值的变化。最后，失业率与保险公司的保费收入呈负相关，这意味着在失业率较高的时期，保单承保会减少。此外，虽然相互关系很明显，但各公司的敏感程度各不相同，较大的保险公司似乎比较小的保险公司更能适应宏观经济波动。该研究得出的结论是，虽然保险公司本质上受到更广泛的经济趋势的影响，但其脆弱性或复原力的程度也取决于公司的特定因素，如规模、资产管理策略和产品多样化。研究结果强调了保险公司在应对不断变化的经济形势时需要采取积极主动的管理策略。关键词:美国经济指标，保险公司盈利能力，宏观经济波动，财务健康，偿付能力比率

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来源期刊

Afro-Asian Journal of Finance and Accounting Economics, Econometrics and Finance-Finance

CiteScore

0.70

自引率

0.00%

发文量

期刊介绍： Finance and accounting are seen as essential components for the successful implementation of market-based development policies supporting economic liberalisation in the rapidly emerging economies in Africa, the Middle-East and Asia. AAJFA aims to foster greater discussion and research of the development of the finance and accounting disciplines in these regions. A major feature of the journal will be to emphasise the implications of this development and the effects on businesses, academics and professionals. Topics covered include: -Asset pricing, corporate finance, banking; market microstructure -Behavioural and experimental finance; law and finance -Emerging economies: finance, audit committees, corporate governance -Islamic finance, accounting and auditing -Equity analysis and valuation, venture capital and IPOs -National GAAP and IASs compliance, harmonisation and strategies -Financial measurement/disclosure, and the quality of information reported -Accountability and social/ethical/environmental measurement/reporting -Cultural, political, institutional impact on financial measurement/disclosure -Accounting practices for intellectual capital and other intangible assets -Provision of non-audit services and impairment to auditor independence -Audit quality and auditor skills; internal control/auditing -Management accounting, control and /use of key performance indicators -Accounting education and professional development, accounting history -Public sector and not-for-profit accounting