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Journal Of Actuarial Practice, Volume 8, Nos. 1 And 2 (2000) -- Masthead & Contents, Colin Ramsay , Editor

Journal of Actuarial Practice (1993-2006)

Contents

Editorial Policy: Topics suitable for this journal include AIDS, annuity products, asset-liability matching, cash-flow testing, casualty rate making, credibility theory, credit insurance, disability insurance, expense analysis, experience studies, FASB issues, financial reporting, group insurance, health insurance, individual risk taking, insurance regulations, international issues, investments, liability insurance, loss reserves, marketing, pensions, pricing issues, product development, reinsurance, reserving issues, risk-based capital, risk theory, social insurance, solvency issues, taxation, valuation issues, and workers' compensation

Review Process

Editor - Colin Ramsay, University of Nebraska

Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of Omaha ○ Ruy Cardoso, …

The Consequences Of Forced Ceo Succession For Outside Directors, Kathleen A. Farrell, David Whidbee

College of Business: Faculty Publications

We find an increased likelihood of outside director turnover following forced CEO succession, especially among those directors that are closely aligned with the outgoing CEO, own little equity, and make poor replacement decisions. Directors that remain on the board, however, are more likely to acquire new directorships than those that remain on the board of a matched-sample firm. Overall, the results suggest that outside directors who are not aligned with the CEO and own relatively large equity stakes are rewarded when they remove a poorly performing CEO and replace him or her with a CEO that improves firm performance.

Journal Of Actuarial Practice, Volume 8, Nos. 1 And 2 (2000), Colin Ramsay , Editor

Journal of Actuarial Practice (1993-2006)

Complete volume, includes ARTICLES:

Realistic Pension Funding: A Stochastic Approach • Shih-Chieh Chang 5

Risk Sources in a Life Annuity Portfolio: Decomposition and Measurement Tools • Mariarosaria Coppola, Emilia Di Lorenzo, and Mari/ena Sibillo . .43

A Comparative Study of the Performance of Loss Reserving Methods through Simulation • Prakash Narayan and Thomas Warthen 63

Concentration in the Property and Liability Insurance Market by Line of Insurance • Edward Nissan and Regina Caveny 89

Safe-Side Requirements in Life Insurance: A Corporate Perspective • Annamaria Olivieri and Ermanno Pitacco 115

Actuarial Analysis of Retirement Income Replacement Ratios • Robert Keng Heong …

Modeling Corporate Bond Default Risk: A Multiple Time Series Approach, Wai-Sum Chan

Journal of Actuarial Practice (1993-2006)

A multiple time series approach is used to forecast the short-term u.s. corporate bond default level. These time series have two auxiliary economic variables: U.S. price inflation and U.S. GNP growth rate. Actual U.S. data from the turn of the century to the present are used to estimate the parameters of multivariate time series model. Diagnostic checks are performed to examine adequacy of the model. The model's forecast for the aggregate U.S. bond default level in 2000-2001 are 0.42% and 0.56%, respectively, while the forecast for the speculative-grade default rate in 2000 is 3.6%, which is more pessimistic than some …

Realistic Pension Funding: A Stochastic Approach, Shih-Chieh Chang

Journal of Actuarial Practice (1993-2006)

The process funding pension plans is viewed as a dynamic control process. Two performance measures are introduced to evaluate the effectiveness of plan contributions: the cost-induced performance measure (CIPM) and the ratio-induced performance measure (RIPM). A dynamic programming approach is used to determining the optimal contributions with the objective of minimizing the performance measure. The methodology developed is applied to a sample of members of Taiwan's Public Employees Pension Plan (Tai-PERS). We show that RIPM produces more stable results than those using CIPM.

Risk Sources In A Life Annuity Portfolio: Decomposition And Measurement Tools, Mariarosaria Coppola, Emilia Di Lorenzo, Marilena Sibillo

Journal of Actuarial Practice (1993-2006)

The paper considers a model for a homogeneous portfolio of whole life annuities immediate. The aim is to study two risk factors: the investment risk and the insurance risk. A stochastic model of the rate of return is used to study these risk factors. Measures of the insurance risk and the investment risk for the entire portfolio are suggested. The problem of the longevity risk is presented, and its consequences with different projections of the mortality tables are analyzed. The model is applied to some concrete cases, and several illustrations show the importance of the two components of the riskiness …

Independent Claim Report Lags And Bias In Forecasts Using Age-To-Age Factor Methodology, Stewart Gleason

Journal of Actuarial Practice (1993-2006)

This paper finds that when report lags are assumed to be independent, the age-to-age factor method produces biased estimates when applied to claim count development data. Two distributions are considered as models for the ultimate number of claims for an accident period: (0 a Poisson distribution, and (ii) a negative binomial distribution. In the Poisson case, the assumption of independent report lags implies the independence of the total number of claims reported in any two periods. In the negative binomial case, however, assuming that report lags are independent does not imply that increments are independent, and a somewhat different argument …

A Comparative Study Of The Performance Of Loss Reserving Methods Through Simulation, Prakash Narayan, Thomas Warthen

Journal of Actuarial Practice (1993-2006)

Actuaries are often asked to provide a range or confidence level for the loss reserve along with a point estimate. Traditional methods of loss reserving do not provide an estimate of the variance of the estimated reserve, and actuaries use various ad hoc methods to derive a range for the indicated reserve. We use a Monte Carlo simulation method to compare various loss reserve estimation methods, including traditional methods and regression-based methods of loss reserving.

Safe-Side Requirements In Life Insurance: A Corporate Perspective, Annamaria Olivieri, Ermanno Pitacco

Journal of Actuarial Practice (1993-2006)

Safe-side requirements concern the assumptions used to calculate premiums in relation to a set of more realistic assumptions. Roughly, safe-side requirements express the capability of premiums to generate positive margins. In a strictly actuarial framework, safe-side requirements are given in terms of some notion of expected profit, calling for assumptions that let such profit be non-negative. An expected profit of zero, however, is not a realistic aim for the insurer. We investigate the notion of conservative assumptions by adopting a unconventional approach. Our focus is the management of the financial resources coming both from premiums and from shareholders' capital. This …

Life Contingencies With Stochastic Discounting Using Moving Average Models, Steven Haberman, Russell Gerrard, Dimitrios Velmachos

Journal of Actuarial Practice (1993-2006)

This paper offers simplified procedures for calculating moments of functions in life contingencies when the random force of interest is modeled using an unconditional moving average process of order q, MA(q). It extends the MA(l) model that has been used for stochastic discounting. Using the more general MA(q) model allows actuaries to better capture the auto correlation between successive interest rates in a time series.

Actuarial Analysis Of Retirement Income Replacement Ratios, Robert Keng Heong Lian, Emiliano A. Valdez, Chan Kee Low

Journal of Actuarial Practice (1993-2006)

A measure of level of post-retirement standard of living is the replacement ratio, i.e., percentage of final salary received as annual retirement income derived from savings. The replacement ratio depends on many factors including salary, salary increases, investment returns, and post-retirement mortality. Elementary life contingencies techniques are used to develop a replacement ratio formula and analyze its sensitivity to these factors.

Concentration In The Property And Liability Insurance Market By Line Of Insurance, Edward Nissan, Regina Caveny

Journal of Actuarial Practice (1993-2006)

This paper uses an National Association of Insurance Commissioners (NAIC) 1995 data set to examine the concentration of property and liability insurance by line of insurance in the U.S. The primary measure of concentration used is the Herfindahl index. The largest 100 affiliates are divided into three largest sets of 20, 30, and 50. We find that the homeowners line is the most concentrated line and commercial auto physical damage is the least concentrated line, with the top 20 affiliates commanding the largest between-set and within-set contributions.

The Effect Of Ceo Tenure On The Relation Between Firm Performance And Turnover, Sam Allgood, Kathleen A. Farrell

Department of Finance: Faculty Publications

We analyze the effect of CEO tenure on the relation between firm performance and forced turnover. We find that the performance-forced turnover relation is conditional on CEO tenure. Our results suggest a constant negative relation between firm performance and forced turnover throughout an inside CEO’s tenure. Founders are entrenched early in their careers but held accountable for firm performance later in their careers. We find evidence that outside hires experience a probationary period, followed by a period of apparent entrenchment during their intermediate years that weakens later in their tenure.

The Impact Of Culture On Feedback- Seeking Behavior: An Integrated Model And Propositions, Mary Frances Sully De Luque, Steven M. Sommer

Department of Management: Faculty Publications

In recent research scholars have addressed the issue of an individual's behavior in feedback-seeking activity and, except in scant studies, have virtually ignored the role of culture in this area. In this article we explore four cultural syndromes, based on past research, to form a cross-cultural model of feedback-seeking behavior. We advance propositions for the study of culture as a moderator to feedback-seeking behavior.

Opportunities For Family Research In Marketing, Suraj Commuri, James W. Gentry

Department of Marketing: Faculty Publications

Family as a consuming and decision making unit is a central phenomenon in marketing and consumer behavior. However, in the recent past, there has been a decline in interest in family as a unit of analysis. Yet, at the same time, the family -- as an institution -- is undergoing a metamorphosis and currently stands at the threshold of significant transformation. In this paper, we argue that the decreased interest in family as a unit of analysis in marketing is largely due to the fact that many interesting propositions about family as a consuming unit remain outside the current perspective …

Environmental And Psychological Challenges Facing Entrepreneurial Development In Transitional Economies, Fred Luthans, Alexander D. Stajkovic, Elina Stajkovic

Department of Management: Faculty Publications

In the former planned economies, a major result of the economic reform programs has been the resurgence of private entrepreneurship. As these countries have struggled to make the transition to a market-based economy over the past decade, the environment has played an important structural role in entrepreneurial development. However, from a psychological perspective, the environmental structural context affects human action through cognitive processes such as self-regulation. Thus, we first identify and analyze the effect of the political, economic, legal, and cultural environment on the development of entrepreneurship in transitional economies, mainly using the former Soviet Union and particularly the Republic …

Environmental Ethical Decision Making In The U.S. Metal-Finishing Industry, Brenda L. Flannery, Douglas R. May

Department of Management: Faculty Publications

We investigated the individual and contextual influences shaping the environmental ethical decision intentions of a sample of managers in the U.S. metal-finishing industry in this study. Ajzen's (1991) theory of planned behavior and Jones's (1991) moral intensity construct grounded our theoretical framework. Findings revealed that the magnitude of consequences, a dimension of moral intensity, moderated the relation- ships between each of five antecedents-attitudes, subjective norms, and three perceived behavioral control factors (self-efficacy, financial cost, and ethical climate)- and managers' environmental ethical decision intentions. We then developed implications for theory and practice in environmental ethical decision making.