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Money and Capital Markets: Financial Institutions and Instruments in a Global Marketplace, 8/e

Peter Rose, Texas A & M University

Mutual Funds, Pension Funds, Insurance Companies, Finance Companies, and Other Financial Institutions

Standard & Poor's Questions

Chapter 17 in Money and Capital Markets: Mutual Funds, Pension Funds, Insurance Companies, Finance Companies, and Other Financial Institutions

Question 1

In Money and Capital Markets we discussed at length the fundamental differences between life insurers and property/casualty type insurers. Please make a list of key differences between these firms. Then using S&P’s Market Insight explain how the financial statements of these insurers reflect these differences?

Question 2

Measured by sales revenue (in the year 2000) which firm was the largest security/broker dealer company on the S&P Market Insight list? The largest life insurance company? The biggest property-casualty insurer? The largest finance company?

Question 3

Can you read the financial statements of a life insurance company? Please take a look at the financial statements published by MetLife for the most recent period and answer the following questions:

a. How much in total assets and total equity capital did MetLife have on the most recent date available?
b. What was MetLife’s return on equity (ROE) and return on assets (ROA) in the most recent period? Were these ratios above or below the average for the life insurance industry as a whole?
c. What was the ratio of MetLife’s debt to its equity capital?
d. How much in total market capitalization did MetLife report?
e. What was this insurer’s net income for the most recent period?

Question 4

The property-casualty insurance industry is quite different in scope and financial and operating characteristics from life insurance companies and other insurance carriers. To help see these differences see if you can answer the questions below for one of the leading property-casualty insurers on the S&P Market Insight list, Allstate Corporation (ALL):

a. Like many property-casualty companies Allstate’s stock price generally declined over the 2000-2001 period. Can you explain some of the reasons why?
b. What are the principal financial services Allstate offers to the public?
c. What is the firm’s credit rating? Why does this matter for a company like Allstate?
d. How many agents devoted to selling Allstate products does the company claim? What trend today is affecting the number and responsibilities of these agents for Allstate and many other insurers?
e. Where does Allstate rank in the P/C insurance industry and by what measure?
f. Where do most of the company’s premiums come from? What risks does this concentration of premium sources suggest may be present?
g. What new product did Allstate recently develop and introduce? Can you see some advantages for this new product?
h. What was Allstate’s most recent corporate acquisition and when did it occur?

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