The Intra-Industry Effects of Life Insurance Company Demutualizaton

Joseph W. Meador and Emery A. Trahan
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Joseph W. Meador: Finance Group, 413 Hayden Hall Boston, College of Business Administration, Northeastern University, MA 02115, USA
Emery A. Trahan: Finance Group, 413 Hayden Hall Boston, College of Business Administration, Northeastern University, MA 02115, USA

JRFM, 2008, vol. 1, issue 1, 1-23

Abstract: We examine the impact of demutualization announcements by 13 life insurance companies during 1996-2000 on the value of existing stock-owned life insurance companies and companies in other segments of the insurance industry. Demutualization announcements are associated with negative stock price reactions in the days around the announcement, and with larger and positive stock price reactions in the days following announcement. Overall, the results support the contention that life insurance company demutualizations signal favorable future industry conditions and/or increased likelihood of future acquisitions for all segments of the insurance industry. Active-minded investors may use these results to develop alpha-generating investment strategies.

Keywords: Demutualization; stock conversion, life insurance, insurance industry (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2008
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