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Measuring Risk Premiums Using Financial Reports and Actuarial Disclosures

Author

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  • Jochen Zimmermann

    (Faculty of Business Studies and Economics, University of Bremen, Hochschulring 4, Bremen 28359, Germany)

  • Stefan Veith

    (Faculty of Business Studies and Economics, University of Bremen, Hochschulring 4, Bremen 28359, Germany)

  • Johannes Schymczyk

    (Federal Financial Supervisory Authority of Germany (Bundesanstalt für Finanzdienstleistungsaufsicht—BaFin), Marie-Curie-Straße 24-28, Frankfurt am Main 60439, Germany.)

Abstract

Insurance companies increasingly augment their financial reports by releasing actuarial measures—the so-called embedded value—to supply information about the value of their life insurance activities. Both accounting and actuarial measures differ with respect to the timeliness of profit realisation and its reliability, and their performance in yielding information may differ. This paper asks if and how embedded values help in assessing risk premiums. We estimate multifactor market models in the spirit of Fama and French, and find that actuarial disclosures are superior to financial accounting in estimating these risk premiums. They further add information to financial reports as an estimator for growth opportunities.

Suggested Citation

  • Jochen Zimmermann & Stefan Veith & Johannes Schymczyk, 2015. "Measuring Risk Premiums Using Financial Reports and Actuarial Disclosures," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(2), pages 209-231, April.
    • Handle: RePEc:pal:gpprii:v:40:y:2015:i:2:p:209-231
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    Citations

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    Cited by:

    1. Derrick W. H. Fung & David Jou & Ai Ju Shao & Jason J. H. Yeh, 2021. "The informativeness of embedded value reporting to stock price," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5341-5376, December.
    2. Burke, Qing L., 2019. "Why haven’t U.S. GAAP and IFRS on insurance contracts converged? Evidence from an unsuccessful joint project," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(2), pages 131-144.

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