【正文】 rights reserved. McGraw Hill / Irwin 16 26 Life Insurance Companies ? Life insurers are under increasing pressure to develop new services. ? Among the most important recent innovative services are universal and adjustable life insurance, variable premium and variable life insurance, mutual funds, tax shelters, venture capital loans, guaranteed investment contracts, corporate cash management systems, and deferred annuities. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 27 PropertyCasualty (P/C) Insurance Companies ? Propertycasualty (P/C) insurers (insurance supermarkets) offer protection against events like fire, theft, bad weather, and negligence that result in injury to persons or property. ? Traditional P/C insurance covers automobile, fire, marine, personal liability, and property. ? Many P/C insurers have also branched into health and medical insurance, clashing headon with life insurers. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 28 PropertyCasualty (P/C) Insurance Companies ? There are nearly 3,000 P/C panies in the ., of which about three quarters are stockholderowned, while the rest are mutuals. ? P/C insurance is a riskier business than life insurance – P/C claims are less predictable and inflation has a potent impact. ? Moreover, the P/C risk patterns appear to be changing. For example, there has been a rapid rise in product liability claims. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 29 PropertyCasualty (P/C) Insurance Companies Source: Board of Governors of the Federal Reserve System 17 ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 30 PropertyCasualty (P/C) Insurance Companies ? Like life insurance firms, P/C insurers plan to break even on their insurance product lines and earn most of their return from their investments. ? However, achieving the breakeven point is difficult. In fact, P/C insurers have experienced billions of dollars in underwriting losses in recent years. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 31 PropertyCasualty (P/C) Insurance Companies ? The earnings and sales revenue of the P/C insurance industry reflect the ups and downs of the business cycle. ? Moreover, inflation pushes up the cost of claims, while intense petition holds premium rates down. ? To improve their future situation, P/C insurers must bee more innovative in developing new services. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 32 Finance Companies ? Finance panies grant credit to businesses and consumers for a wide variety of purposes, including the purchase of business equipment, automobiles, vacations, and home appliances. ? As such, they are sometimes called department stores of consumer and business credit. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 33 Finance Companies ? Consumer finance panies make personal cash loans to individuals, such as home equity loans and loans to support the purchase of passenger cars and home appliances. ? Sales finance panies make indirect loans to consumers by purchasing installment paper from dealers selling consumer durables. ? Commercial finance panies focus mainly on extending credit to business firms. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 34 Finance Companies ? Finance panies are heavy users of debt in financing their operations. ? The lack of an extensive work of branch offices has put many finance panies at a disadvantage. ? The number of finance panies is on the decline, although their average size has grown considerably. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 35 Other Financial Institutions ? Security dealers “take a position of risk” in securities. They trade in securities with the expectation of earning a profitable spread. ? Investment bankers assist businesses and governments in issuing debt and stock. ? Venture capital firms provide longterm capital financing for new businesses and rapidly emerging panies. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 36 Other Financial Institutions ? Mortgage banks work with other businesses on real estate development projects and sell the resulting loan instruments to other investors. ? Real estate investment trusts (REITs) fund mercial and residential real estate projects. ? Leasing panies purchase business equipment and other assets and then lease them in return for rental fees. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 37 Trends Affecting All Financial Institutions Today ? There are several major trends affecting virtually all financial institutions today: ? increasing cost pressures ? consolidation ? service diversification and homogenization ? convergence ? technological revolution ? global petition ? regulatory cooperation and harmonization ? deregulation ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 16 38 Money and Capital Markets in Cyberspace ? Mutual funds are discussed at and ? More information on pension funds can be found at and ? Websi