TITLE
"Insurer's Expansion into Banking: A Look at Operating Returns," Journal of Insurance Issues, Carolin D. Schellhorn and Nicos A. Scordis, Spring 2002, Vol. 25, No. 1, pp. 1-23. Entire article in Acrobat format.

ABSTRACT
We investigate whether insurers can improve their operating risk-return profile by adding commercial loans, a banking product, in the traditional insurance product mix.  This analysis is important for two reasons. First the Gramm-Leach-Bliley Act of 1999 allows insurers to buy and operate banks. Second, existing research finds that banks can improve their risk-return profile by adding insurance products, but offers no guidance on whether insurers might benefit from an expansion into banking.  We use individual product data to construct insurance-only portfolios of products and insurance-banking portfolios of products.  Analysis of portfolio operating returns and their standard deviations indicates that insurer-banks are unlikely to outperform full-line insurers that have carefully selected their product mix.  The mere expansion of an insurance firm into banking does not necessarily result in a competitive operating risk-return profile. 

[Keywords: bankinsurance, risk, reutrn]