The Determinants of Financial Derivatives Use in the UK life Insurance Industry

This paper examines the determinants of financial derivatives use in the United Kingdom (UK) life insurance industry. We estimate a probit regression model and a Heckman two-stage sample selection regression model using a sample of 88 UK life insurers in 1995. Our results indicate that the propensity to use derivative instruments is positively related to a firm’s size, leverage and international links, and negatively related to the extent of reinsurance. We also find that mutual life insurance firms have a greater propensity to use derivatives than proprietary firms. The positive relation with leverage and the negative relation with reinsurance support the hypothesis that UK life insurers use derivatives to offset risk, rather than as a speculative means of income generation

The Determinants of Credit Ratings in the United Kingdom Insurance Industry

Executive Summary The Determinants of Credit Ratings in the United Kingdom Insurance Industry Academic researchers have devoted a considerable amount of attention to the activities of credit rating agencies over the past 20 years, focusing in particular on the agencies’ potential role in overseeing corporate financial strength and promoting the efficient operation of financial markets. Examinations of credit rating practices has recently extended to the insurance industry, where the complex technical nature of market transactions leads to policyholders, investors and others facing particularly acute information asymmetries at the point-of-sale. Published credit ratings are therefore seen as helping to alleviate imperfections in insurance markets by providing a third party opinion on the adequacy of an insurer’s financial health and the likelihood of it meeting obligations to policyholders and others in the future. Although the United Kingdom (UK) insurance market is now one of the five largest in the world, relatively little is known about the practices of the major firms and policy-makers which influence its operations. In particular, whilst the determinants of rating agencies’ assessments of United States (US) insurers is well documented, published studies have yet to provide comprehensive evidence about insurance company ratings in the UK. This study attempts to fill this gap by examining the ratings awarded by two of the world’s leading agencies – A.M. Best and Standard and Poor (S&P) – and establishing the extent to which organizational variables can help predict: (i) insurance firms’ decision to be rated; and (ii) the assigned ratings themselves. Our sample of UK data comprises ratings made by A.M. Best and S&P over the period 1993-1997 for both life and property-liability insurers. The panel data we use is ordinal in nature and is therefore analysed using an ordered probit model. However, because neither A.M. Best or S&P rate the full population of UK insurance firms our data set is potentially subject to selfselection bias and we therefore extend the model to correct for such problems. In particular, the paper examines the effect of eight firm-specific variables (namely, capital adequacy, profitability, liquidity, growth, size, mutual/stockowner status, reinsurance level, and short/long-term nature of business) on the ratings awarded by the two agencies, as well as on insurance firms’ decisions to volunteer for the ratings in the first place. In general terms, our evidence concurs with earlier US findings, and suggests that although the decision to be rated by either of the agencies is largely influenced by a common set of factors, the determinants of the ratings themselves appear to differ. Specifically, our first main finding is that insurers’ decisions to be rated by either A.M. Best or S&P is positively related to surplus growth, profitability and leverage. Second, while we find that A.M. Best’s ratings are positively linked to profitability and liquidity, as well as being generally higher for mutual insurers, the findings for S&P differ substantially. Although liquidity again exerted a positive influence on assigned ratings, the only other statistically significant variable was financial leverage, which had a negative sign. We believe that the results of our research are of potential importance for companies operating in insurance markets as well as for policy-makers, brokers and others. For example, the evidence that mutual insurers are generally assigned higher ratings than stock insurers suggests that certain publicly-traded insurers, in particular new entrants, might not possess sound financial strength and may require closer regulatory scrutiny than other, more established, insurance firms. In addition, the finding that liquidity has a significantly positive effect on ratings assigned by two of the world’s leading credit agencies should provide a measure of confidence about the robustness of the ratings to industry regulators, policyholders and investors in the UK. This could imply that external ratings might eventually play a role in substituting for costly industry regulation. The study concludes that although the factors influencing the decision to be rated by A.M. Best or S&P are broadly the same, a degree of variability exists in the variables which influence the actual ratings themselves. Insurance company managers should be aware of this when contemplating whether to seek an independent rating and which agency to choose for the assessment. We therefore believe that this study fills an important gap in the literature about key players in the important UK insurance market and provides a basis for the conduct of future research

Structural Forecasts for the Danish Economy Using the Dynamic-AAGE Model

We describe how an applied dynamic general equilibrium model of the Danish economy has been developed to generate structural forecasts. The forecasts provide a microeconomic picture that is consistent with a macroeconomic scenario and the other inputs. We provide an overview of the inputs required to generate the forecasts and of the forecast methodology. Finally, we present aspects of the forecasting results.Research and Development/Tech Change/Emerging Technologies,

Zeeman-limited Superconductivity in Crystalline Al Films

We report the evolution of the Zeeman-mediated superconducting phase diagram (PD) in ultra-thin crystalline Al films. Parallel critical field measurements, down to 50 mK, were made across the superconducting tricritical point of films ranging in thickness from 7 ML to 30 ML. The resulting phase boundaries were compared with the quasi-classical theory of a Zeeman-mediated transition between a homogeneous BCS condensate and a spin polarized Fermi liquid. Films thicker than $\sim$20 ML showed good agreement with theory, but thinner films exhibited an anomalous PD that cannot be reconciled within a homogeneous BCS framework.Comment: 8 pages, 9 figure

The correspondence of W.E.B. Du Bois and Booker T. Washington

Contained in this thesis is an annotated edition of the correspondence between the African-American leaders W.E.B. Du Bois and Booker T. Washington. Du Bois and Washington would go on to become rivals, their philosophies of education and racial uplift diverging from one another. Du Bois favored vocal protest and higher education, while Washington preferred a gradual approach of vocational education and economic advancement. However, this correspondence sees them attempting, albeit unsuccessfully, to work together. Covering the decade between 1894 and 1904, the letters touch on a variety of political, social, and educational topics at a crucial time for race relations in America. The differences between the two men that would lead to their split - age, regional origin, education, philosophy - are seen in the correspondence, but so too is a spirit of cooperation. These themes are explored in an introductory essay, while other more specific contextual details are provided in the footnotes accompanying the letters. The many individuals mentioned by Du Bois and Washington are annotated, allowing the reader a fuller understanding of the social world of black activism at the turn of the twentieth century. Narrative material is provided to help bridge the gap between letters, and a timeline detailing the relationship between the two men is also included. While some of these letters have been published before, their presentation as part of an annotated correspondence allows for a greater understanding of this primary source material

Internal Short Distance Migration and College Enrollment in Mississippi

[No abstract provided.

The nitrogen factor in sweet potato production in Iowa

The general aspects of the effect of nitrogen fertilization on the yield, storage quality and chemical composition of sweet potatoes have been covered in this three-year investigation at Muscatine Island;Sweet potatoes responded to nitrogen fertilizers whenever leaching of the natural soil nitrates occurred. The use of delayed applications of nitrogen appears to be the best approach to the solution of the problem;No nitrogen should be applied to the soil until the plants have become established. Then, providing that a loss of soil nitrates is probable because of leaching due to heavy rainfall, an initial application of nitrogen should be made at this time. Further applications should be made if the plants continue to show symptoms of nitrogen deficiency or if other rainy periods follow. Several inorganic fertilizers and possibly uramon are suitable sources of nitrogen for side-dressing;Phosphorus and potassium are definitely limited in the soils used in the investigation and these nutrients must be supplied before beneficial effects can be secured from the use of nitrogen;Nitrogen fertilizer applications showed no consistent or pronounced effect on the storage qualities and the sugar, starch or soluble nitrate content of sweet potatoes. The use of delayed applications of nitrogen increased the colloidal nitrogen content of the roots and in one year materially reduced the loss from storage rots