A structural equation modeling analysis on solvency, operation and profitability of life insurers

The abilities of life insurers can be divided and measured from various aspects. Through the use of structural equation modeling, we investigate the relations among solvency, operation ability and profitability in year 1994, 1995 and 1996. After within-year analysis and longitudinal data analysis, we found that operation ability has a positive influence on the size and income of life insurers and has a slight negative effect on the return on capital during these years. While the effect of solvency, asset risk and product risk on return on capital is not significant.