1. Discussion Estimating the Underwriting Profit Margin of P&C Insurers Based on the Full- Information Underwriting Beta August, 2007

2. Overview Underwriting profit margins differ by line of business Prior research has assumed the only difference in UW profit margins is due to differences in the time to loss payouts by line. Current paper uses holding time, adds expenses, and tax rates as additional predictors of underwriting profit margins

3. Methodology Step 1: Calculate firm level underwriting beta by time series using CAPM model. –Dependent variable = underwriting profit margin = (1-CR) –1991-2005, some firms have only 8 years of data. Step 2: Use Step 1 to calculate by-line underwriting betas by cross-section regression where B i = estimated coefficient for line of business share.

4. Methodology Step 3: Use results from Step 2 to estimate fair underwriting profit margins by line, controlling for holding periods, tax and expense rates. Find significant differences in underwriting beta by line and fair underwriting profit by line.

5. Suggestions for Improvements Table 1

6. Suggestions for Improvement Relatively small sample size the declines at each successive step of the estimation –Check the model against US data to increase sample size. Clarify contributions of the paper. –Not clear what the marginal improvement is to adding taxes and expenses in underwriting profit margin estimations as compared to prior research.