17. In an article in Forbes, the following statement appeared, contrasting the management of stock insurance companies
Question:
17. In an article in Forbes, the following statement appeared, contrasting the management of stock insurance companies and mutual insurance companies:
With their survival on the line, publicly traded insurers are scrambling for cash by cutting dividends and issuing new shares (diluting existing investors), begging regulators for a relaxation of capital requirements and lobbying Washington for a cut of the $700 billion Wall Street bailout. Their mutually owned rivals haven’t asked for a dime. Their statutory surpluses (the regulatory counterpart to book value) have held steady or even increased. Some are announcing plans to pay out near-record dividends to policyholders.22 What message is being conveyed in this statement, and how does it relate to the principal-agent problem?
Step by Step Answer:
Foundations Of Global Financial Markets And Institutions
ISBN: 9780262039543
5th Edition
Authors: Frank J. Fabozzi, Frank J. Jones, Francesco A. Fabozzi, Steven V. Mann