The curious case of the Occidental and Regal : the evolution of solvency and disclosure standards in the Australian life insurance industry

In 1990, the Australian life insurance industry was rocked by a scandal that threatened to destabilize consumer confidence in the ability of insurance providers to meet policyholder liabilities. The incident highlighted the nature of the agency problems that arise when conditions of asymmetric information exist. It revealed systemic weaknesses in accounting, solvency and disclosure standards as they applied to life insurers. This article uses an evolutionary concept of agency to analyse government and industry responses to this event. It is argued that initial adaptive responses stabilized the industry and averted a more serious crisis. Longer term innovative responses led to the introduction of a new and more rigorous approach to reporting and solvency standards, which has improved information flows and agency outcomes.

The pricing and underwriting costs of Japanese REIT IPOs

This study investigates 40 Japanese REIT IPOs during 2001 to 2006 and finds evidence that higher final offer prices are reflected in higher underpricing levels by such IPOs. There is also some evidence that the engagement of one of the big three Japanese underwriting firms suggests less money is left on the table. Economies of scale in underwriting fees for Japanese REIT IPOs are also found. Specifically, the percentage underwriting fees decrease with higher amounts of equity capital sought but the percentage fee decreases at a diminishing rate.

Height and construction costs of residential buildings in Hong Kong and Shanghai

A widely recognised theme of construction economics suggests that the cost of construction per square metre increases as building height rises. However, after many years, research conducted regarding the height and cost issue have established a classic relationship between those two, well known as a U-shaped curve. This paper describes the study of height-cost relationship of high-rise residential buildings in Shanghai and Hong Kong. Initial findings indicated that the curved relationships of height-cost of residential buildings in Shanghai and Hong Kong exhibit different profiles. The differences suggest that, Hong Kong contractors have more expertise in multi-storey and high-rise construction than contractors in Shanghai. The dissimilarities also imply that different sets of criteria should be applied in the judgement of height affects cost in different locations. Many factors could be contributors, such as the history and experience in constructing residential high-rise buildings, location, linkage and relationships to the neighbourhood provinces, design and construction regulations, and government policy on residential construction.

Outcomes and costs of primary care surveillance and intervention for overweight or obese children : the LEAP 2 randomised controlled trial

Objective To determine whether ascertainment of childhood obesity by surveillance followed by structured secondary prevention in primary care improved outcomes in overweight or mildly obese children.

Design Randomised controlled trial nested within a baseline cross sectional survey of body mass index (BMI). Randomisation and outcomes measurement, but not participants, were blinded to group assignment.

Setting 45 family practices (66 general practitioners) in Melbourne, Australia.

Participants 3958 children visiting their general practitioner in May 2005-July 2006 were surveyed for BMI. Of these, 258 children aged 5 years 0 months up to their 10th birthday who were overweight or obese by International Obesity Taskforce criteria were randomised to intervention (n=139) or control (n=119) groups. Children who were very obese (UK BMI z score 3.0) were excluded.

Intervention Four standard consultations over 12 weeks targeting change in nutrition, physical activity, and sedentary behaviour, supported by purpose designed family materials.

Main outcomes measures Primary measure was BMI at 6 and 12 months after randomisation. Secondary measures were mean activity count/min by 7-day accelerometry, nutrition score from 4-day abbreviated food frequency diary, and child health related quality of life. Differences were adjusted for socioeconomic status, age, sex, and baseline BMI.

Results Of 781 eligible children, 258 (33%) entered the trial; attrition was 3.1% at 6 months and 6.2% at 12 months. Adjusted mean differences (intervention – control) at 6 and 12 months were, for BMI, –0.12 (95% CI –0.40 to 0.15, P=0.4) and –0.11 (–0.45 to 0.22, P=0.5); for physical activity in counts/min, 24 (–4 to 52, P=0.09) and 11 (–26 to 49, P=0.6); and, for nutrition score, 0.2 (–0.03 to 0.4, P=0.1) and 0.1 (–0.1 to 0.4, P=0.2). There was no evidence of harm to the child. Costs to the healthcare system were significantly higher in the intervention arm.

Conclusions Primary care screening followed by brief counselling did not improve BMI, physical activity, or nutrition in overweight or mildly obese 5-10 year olds, and it would be very costly if universally implemented. These findings are at odds with national policies in countries including the US, UK, and Australia.

The privatisation experience in banking and insurance in Australia

The role of ownership in performance of financial institutions is under-examined yet remains a topical issue. Whilst ownership changes in the banking sector have been evaluated in several studies, the link with other sectors has not been a focus of in depth analysis. A controlled comparison of performance between privatising banks and insurance firms in Australia is undertaken via a ‘meso’ approach of pairing privatising with comparator private institutions across the event period. Performance is evaluated using commercial CAMEL indicators and applying Wilcoxon rank tests (Otchere and Chan 2003) which provide statistically robust findings in the small annual data samples available around the privatisation event. Performance of privatising and private institutions is found to be quite similar before and after the event. For the privatising banks, some indicator medians improved to commercial levels (CBA) or were mostly unchanged (Colonial). By contrast one of the privatising insurance institutions (Suncorp) was found to outperform the private insurance comparator while there was little difference for the other (GIO).

Household structure and consumption insurance of the elderly

This paper examines the role of household formation in providing consumption insurance to the elderly. Using data from the Consumer Expenditure Surveys, raw tabulations of per adult equivalent consumption indicate that the elderly who live alone have higher levels of well-being relative to those who live with others. This is misleading, however, because the decision to live alone is clearly endogenous. The empirical estimation accounts for this endogeneity using data from the Panel Study of Income Dynamics. The results provide evidence that household formation plays a significant role in maintaining consumption levels. Without the opportunity to live with others, the welfare gap measured by the difference between per adult equivalent consumption levels of dependent and independent livers would be even larger. These findings suggest that co-residing with others effectively supplements social security, pensions, and private savings and helps the elderly to smooth consumption in old age.