Bank affiliation influence on life insurers’ performance before and after the financial crisis

The article analyses the link between life insurers’ profitability and bank affiliation. It also examines the influence that the differences in product mix and distribution costs displayed by bank affiliated versus traditional insurers has on results. On top of that, it investigates the changes that the big financial crisis caused in the previously established correlations, helping us to explore the influence of macroeconomic settings on performance’s drivers. To achieve the above goals, we consider a sample of Italian life insurers and we perform a panel regression analysis using variables based on information coming from insurers’ financial statements and ownership data from 2003 to 2013. Our results highlights that, until 2007, possibly due to different products’ offerings depending on their affiliation, neither distribution efficiency nor being bank affiliated significantly affected life insurers’ performance. Product mix composition did not influence results as well. During the bull financial market lasting from 2000 to 2007, financial policies marketed by bank affiliated insurers fetched good returns to their issuers thanks to exceptionally high management fees compensating from their lower profitability compared to traditional with profit policies. However, the big financial crisis challenged the previous drivers of profitability. In the new macroeconomic conditions, both distribution efficiency and bank affiliation prove to be crucial in fostering performance. Moreover, adverse economic conditions make product mix revision crucial in order to adapt to changes in demand and sustain profitability.