Company's Surplus Research Articles

Earnings management and analyst forecast

This study explores the relationship between surplus management, analysts’ attention, and earnings forecasts, which we empirically analyze by selecting selected A-share listed companies in China from 2015 to 2022 as a research sample. Our findings indicate that the higher the degree of the company's surplus management, the lower the degree of analysts’ attention. Furthermore, the higher the degree of the company's earnings management, the lower the degree of analysts’ over-attention. Moreover, the higher the branch's earnings management degree, the lower the analysts’ earnings forecasting accuracy. Finally, substantial differences exist in the relationship between earnings management and analysts’ forecasts, such as business property rights.

Optimal reinsurance design under solvency constraints

We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In particular, the insurance company's surplus is here (as is routinely the case) approximated by a Brownian motion, as opposed to the geometric Brownian motion used to model assets in finance. Furthermore, risk exposure is dialled ‘down’ via reinsurance, rather than ‘up’ via risky investments. This leads to interesting qualitative differences in the optimal designs. In this paper, using the martingale method, we derive the optimal design as a function of proportional, non-cheap reinsurance design that maximises the quadratic utility of the terminal value of the insurance surplus. We also consider several realistic constraints on the terminal value: a strict lower boundary, the probability (Value at Risk) constraint, and the expected shortfall (conditional Value at Risk) constraints under the P and Q measures, respectively. In all cases, the optimal reinsurance designs boil down to a combination of proportional protection and option-like protection (stop-loss) of the residual proportion with various deductibles. Proportions and deductibles are set such that the initial capital is fully allocated. Comparison of the optimal designs with the optimal portfolios in finance is particularly interesting. Results are illustrated.

Discrete-Time Model of Company Capital Dynamics with Investment of a Certain Part of Surplus in a Non-Risky Asset for a Fixed Period

A periodic-review insurance model is studied under the following assumptions. One-period insurance claims form a sequence of independent identically distributed nonnegative random variables with a finite mean. At the beginning of each period a quota δ of the company surplus is invested in a non-risky asset for m periods. Theoretical expressions for finite-time and ultimate ruin probabilities, in terms of multiple integrals, are presented and applied to the particular case where claims are exponential. Dividend problems are also considered. Numerical results obtained by virtue of simulation are provided and other algorithmic approaches are discussed. Sensitivity analysis of ruin probability is carried out for the case of exponential claims.

A profit-based self-scheduling framework for generation company energy and ancillary service participation in multi-constrained environment with renewable energy penetration

This paper presents a profit-based self-scheduling framework for generation company participation in energy and ancillary service markets under multi-constrained environment with renewable energy participation. The participation strategies of generation company include various objectives incorporating economic (profit maximization), environmental (emission minimization), and social (maximum load satisfaction) aspects. The total objective under single, dual and multi-constrained approaches is formulated along with appropriate constraints for energy, spinning reserve, and non-spinning reserve offerings in various markets. In addition, the impact of renewable energy participation in energy market on scheduling decisions of generation company in different markets is also examined. The renewable energy independent power producers namely wind energy and solar photovoltaic energy generators are considered in this study. The sensitivity analysis is also carried out to examine the impact of reserve deployment probability on optimal offerings and generation company surplus in energy as well as ancillary service markets. To solve the proposed framework, binary fireworks algorithm is used, considering the binary natured commitment problem of generation company’s thermal units. The simulation results of proposed framework tested using thermal units, wind energy independent power producer, solar photovoltaic independent power producer are presented for base case and various scenarios involving single, dual and multi objectives. The comparison shows the effectiveness of proposed multi-constrained approach in arriving at optimal offering of generation company under economic, environmental and social constraints. Therefore, this integrated approach can prove to be an effective tool for generation company participation in energy and ancillary service market under renewable participation.

Modeling and asymptotic analysis of insurance company performance

We consider a classical Cramér-Lundberg model with dividends. It is additionally supposed that the claim amounts have exponential distribution. Moreover, we are interested in a barrier dividend strategy with Parisian implementation delay. That means, the payment is made only if the company surplus stays above the barrier at least during time interval of length h. The mean expected discounted dividends paid before Parisian ruin are chosen as objective function. Optimization is carried out. The results are compared with those obtained previously by the authors for the no-delay case. Statistical estimation, stability problems and simulation are tackled as well.

On a perturbed compound Poisson risk model under a periodic threshold-type dividend strategy

In this paper, we model the insurance company's surplus flow by a perturbed compound Poisson model. Suppose that at a sequence of random time points, the insurance company observes the surplus to decide dividend payments. If the observed surplus level is larger than the maximum of a threshold $ b>0 $ and the last observed level (after dividends payment if possible), then a fraction $ 0<\theta<1 $ of the excess amount is paid out as a lump sum dividend. We assume that the solvency is also discretely monitored at these observation times, so that the surplus process stops when the observed value becomes negative. Integro-differential equations for the expected discounted dividend payments before ruin and the Gerber-Shiu expected discounted penalty function are derived, and solutions are also analyzed by Laplace transform method. Numerical examples are given to illustrate the applicability of our results.

Stability of solutions in optimal reinsurance problem

A discrete-time insurance model with stop-loss reinsurance is considered. One-period insurance claims form a sequence of independent identically distributed nonnegative random variables with finite mean. The insurer maintains the company surplus above a chosen level a by capital injections. We study the stability of optimal capital injections to the variability of claims distribution. The term “optimal” means the minimal amount of injections that can be found from the corresponding Bellman equation.

Pengujian Pecking Order Theory terhadap Perusahaan Surplus Non Keuangan di Bursa Efek Indonesia

. The importance of knowing that a firm is profitable, can be seen whether the company surplus or the otherwise. The study related to pecking order theory for surplus firm is still rare, since almost the majority of research in pecking order theory in Indonesia is focused only on one or more sectors. Among the several capital structures, the chosen is pecking order theory, because this theory is a dynamic theory in accordance with the market which is not perfect compared with other capital structure theory. The purpose of this study is to find out whether the non-financial companies listed on the BEI follow the pecking order theory, whether the surplus companies follow the pecking order theory and whether the surplus companies use the surplus that has to pay the company's debt. The research method using E-views 9 software, where the sample selection using purposive sampling method. The findings from the research of non-financial companies in Indonesia do not follow pecking order theory, surplus companies do not follow pecking order theory to pay the debt in advance and surplus companies do not pay debts using surplus owned.

最优分红策略:正则与脉冲混合控制问题

In this paper, we revisit the classic optimal dividend problem in a diffusion model. Note that, the aggregated dividend payments process is a cadlag process, whose path can be partitioned into two parts: Continuous part and discontinuous part. Therefore, we incorporate both the continuous dividend form and the impulse dividend form in our model, which leads to a regular-impulse combined stochastic control problem. We assume that there exist a maximum rate for continuous dividend payments and both proportional and fixed costs for impulse dividend payments. When the company's surplus is described by a drifted Brownian motion, and the objective is to maximize the expectation of total discounted dividend payments up to the time of ruin, we obtain the explicit closed-form expressions for the value function and the optimal dividend policy. The optimal dividend policy is shown to be a combinational form of the threshold policy and the impulse policy.

Discrete-time Insurance Model with Capital Injections and Reinsurance

A periodic-review insurance model is considered under the following assumptions. In order to avoid ruin the insurer maintains the company surplus above a chosen level a by capital injections at the end of each period. One-period insurance claims form a sequence of independent identically distributed nonnegative random variables with finite mean. A nonproportional reinsurance is applied for minimization of total expected discounted injections during a given planning horizon of n periods. Insurance and reinsurance premiums are calculated using the expected value principle. Optimal reinsurance strategy is established. Numerical results illustrating the theoretical ones are provided for three claims distributions.

Optimal combinational quota-share and excess-of-loss reinsurance policies in a dynamic setting

In this paper, we describe a large insurance company's surplus by a Brownian motion with positive drift, which is the approximation of a classical risk process. The problem of minimizing the probab...

Optimal combinational quota‐share and excess‐of‐loss reinsurance policies in a dynamic setting

AbstractIn this paper, we describe a large insurance company's surplus by a Brownian motion with positive drift, which is the approximation of a classical risk process. The problem of minimizing the probability of ruin by controlling the combinational quota‐share and excess‐of‐loss reinsurance strategy is considered. We show that the optimal combinational reinsurance strategy must be the pure excess‐of‐loss reinsurance strategy. Moreover, we give an explicit solution for the optimal reinsurance strategy. Copyright © 2006 John Wiley & Sons, Ltd.

Surplus Management under a Stochastic Process

To immunize an insurance company's surplus against interest-rate fluctuations, asset-liability managers commonly adopt the so-called classical immunization strategy to set the duration of the surplus equal to zero. Unfortunately, this strategy is derived on the basis of the flat-term structure. This article examines the immunization strategy with a stochastic process, which can generate a mean-reverting term structure. By means of the stochastic process, the authors provide a measurement for evaluating the assets and liabilities of the insurance company. The authors also show that the immunization strategy suggested in the article is a general model and includes the classical immunization strategy as a special case. Furthermore, if a firm's objective is to maximize its convexity of the surplus subject to zero surplus duration and its budget constraint, the authors demonstrate that linear programming can implement the optimal immunization strategy in this case. Moreover, the results of this simulation show that the cost of failing to recognize stochastic interest-rate changes can be extremely high.

Linking strategic and tactical planning systemsfor asset and liability management.

Total enterprise risk management involves a systematic approach for evaluating/controlling risks within a large firm such as a property‐casualty insurance company. Thebasic idea is to coordinate planning throughout the organization, from traders and underwritersto the CFO, in order to maximize the company's economic surplus at the desiredlevel of enterprise risk. At present, it is difficult to link strategic systems, such as assetallocation, to tactical systems for pricing securities and selecting new products. We proposetwo solutions. First, we develop a “price of risk” for significant decisions possessingcorrelatedfactors. Second, we create a set of dynamic investment categories, called hybrid assets,for use in an asset and liability management framework. We illustrate the concepts via aninsurance planning problem, whereby the goal is to optimize the company's surplus.

An Empirical Analysis of Mutual Life Insurance Company Surplus

The study of the appropriate level of surplus for life insurers has received little attention on the part of researchers. This is probably due to the fact that life company surplus levels are limited by law at a low level relative to company assets. It is clear, however, that a great deal of money is represented by this component of the balance sheet and that more attention should be devoted to the level of surplus held by such companies in relation to the need for surplus. This study analyzes the surplus levels of the five largest mutual life insurers in relation to the historical need for surplus for the period 1925 to 1969. At a time when consumers are evidencing increasing interest in life insurance, particularly the cost of the product, it is incumbent upon the life insurance industry to develop a more definitive rationale regarding the level of surplus required to keep a mutual life company viable, rather than basing the amount of surplus on rules of thumb, tradition, or maximum limits established by law. A determination of the appropriate level of surplus has direct implications for policyholder dividends, since dividends represent the most immediate control mutual life companies have over surplus levels. The development of any rationale for what might be considered an appropriate level of surplus for a life insurer has Howard E. Winklevoss, D.B.A., is Assistant Professor of Insurance in the Wharton School of the University of Pennsylvania. Robert A. Zelten, Ph.D., is Assistant Professor of Insurance in the Wharton School of the University of Pennsylvania. This paper was submitted in August, 1972. The authors would like to acknowledge the assistance of N. F. Jones, Alan Lauer, Charles L. Trowbridge and their colleagues in the Wharton School who made comments on an earlier draft. The contents of the final article, however, remain the sole responsibility of the authors. received scant attention in the literature. Most of the published research in the area of life company surplus has dealt with the method of distributing divisible surplus to policyholders rather than with the matter of how divisible surplus should be ascertained in the first place. One article, however, addresses the question of how large surplus should be for a mutual life insurance firm.' The author discusses several sources and uses of surplus and develops a very general model for determining a proper surplus level. The article, however, contains no empirical analyses of the historical levels of surplus among mutual life insurance companies in relation to the various risks that surplus is designed to meet. The purpose of this article is to delineate the needs for surplus and to analyze empirically how these needs compare to the funds held as surplus by the five largest mutual life insurers for the period 1925 to 1969. In addition, the pattern of surplus accumulation is examined from 'Charles L. Trowbridge, Theory of Surplus in a Mutual Insurance Organization, Transactions of the Society of Actuaries, Vol. XIX, Pt. I, 1967, pp. 216-32.