TITLE
"The Impact of Management Communications on Insurance Company Share Repurchases," Journal of Insurance Issues, John Polonchek and Ronald K. Miller, Fall 2005, Vol. 28, No. 2, pp. 183-210. Full-text articles soon will be available through ABI/INFORM and EBSCO. Entire article in Acrobat format.

ABSTRACT
The announcement of a share repurchase provides a firm’s management with the opportunity to communicate with existing and potential shareholders. Our results indicate that voluntary information disclosed by management in an insurance company’s repurchase announcement concerning the future prospects of the firm has little marginal impact on the market’s reaction to the repurchase announcement. The one exception is management statements indicating that the repurchase of common shares represents a good investment for the firm. In contrast, our results indicate that information disclosed by management about the details of the repurchase program does have a marginal impact on the market’s reaction to the repurchase announcement. For example, if the firm’s management mentions the method of repurchase there is an increase in the market’s reaction to the announcement, regardless of the method. In addition, the usage of a tender offer to repurchase stock has a large statistically significant positive effect on the market’s reaction to the announcement of a repurchase. Variables that control for the size of the repurchasing firm, the relative size of the repurchase, and repurchases that are part of an ongoing multi-year repurchase program also have more impact on the market’s reaction than most management statements concerning the future prospects of the firm. The implication for insurance company managers is that the market appears to assign value (abnormal returns) to the common stock repurchase announcement and the information about the terms of the deal, but the market does not appear to perceive management’s statements about the condition of the firm as containing any additional information.
[Key words: stock, repurchases, signals].