La creatividad en las evaluaciones externas Los informes PISA

Since the early 1980s the diversity of disclosure practices exhibited by life insurance companies operating in international . insurance markets has become an issue of increasing public importance (Smart, 1985 ; Horton & Macve, 1992, 1994; Ries, 1992; Adams & Scott, 1994; Thomson, 1994). A summary of the important factors underlying the emergence of voluntary disclosure by life insurance companies as a prominent public issue, and hence its importance as a subject for research, is illustrated in Figure 2. 1 . Four of the major factors accounting for the increased public saliency of the issue of different corporate reporting practices among life insurance companies are examined further below:

(a) Demutualisation

Horton & Macve (1994, p. 83) contend that for mutuals " . . . accounting results have not . . . generally been an issue . . . as only policyholders share in profits, and their conunitment is generally long-term. " However, in recent years the intention of some major mutual Australian life insurance companies (e.g. , NML and CML) to seek listing status on international stock exchanges in order to raise additional capital has

led to public concern about the lack of information disclosure in annual reports. and the adverse effect that this could have on the ability of prospective investors and financial analysts to make sound economic judgements (Ries, 1 992; Needleman & Westall, 1993). Therefore, demutualisation has prompted greater public demand for a consistent basis for annual performance measurement and more information disclosure by life insurance companies in their annual reports. Since Australian mutuals such as CML and NML play an important role in the New Zealand life insurance industry, the demutualisation issue and its influence on corporate reporting

practices are likely to be of as much relevance in New Zealand as it is in other markets in which mutuals operate.

(b) Regulatory developments

Since the October 1987 stock market crash, there has been an increasing trend by regulators in many countries to introduce life insurance GAAP and instigate tighter legislative and regulatory control over the reporting for life insurance companies I activities. Internationally, such initiatives have sought to increase information disclosure among insurance companies primarily to enable investors to better gauge the current and projected yields from investing in life insurance companies compared with alternative investment opportunities (Creedon, 1979; Smart, 1985 ; Whewell,

1990). Regulatory developments have also been motivated by the desire of industry regulators to improve corporate governance in insurance markets (Cowe, 1 993) . The

New Zealand and the development of an accounting

standard for the life insurance industry are examples of the new regulations which aim to improve consistency among life insurance companies in New Zealand.

( c) Takeover activity

Several factors can motivate corporate takeover activity, including the desire to expand into new markets (or new segments of existing markets) or to realise economies of scale in business operations. However, some commentators (e.g. , Field,

1991 ; Salmon & Fine, 1991; Horton & Macve, 1992) have suggested that insufficient corporate disclosure in annual reports could encourage takeover activity because it does not reflect true and fair performance and could understate the traded market value of life insurance companies. For example, in their analysis of the 1988-1989

takeover of the UK Pearl Assurance Group by the Australian mutual company AMP, Salmon & Fine ( 1991) contend that greater information disclosure, particularly with regard to the actuarial assumptions and methods used in the valuation of the assets and

Key Institutional Influences on Life Insurance Company Disclosure Practices

This figure illustrates the major institutional factors which have helped to make the corporate disclosure practices of life insurance companies an important public issue both in New Zealand and elsewhere. Four of the most significant factors which have been reported in the literature in recent years are: demutualisation proposals, regulatory developments (e.g., GAAP), the increased incidence of corporate takeover activity, and product-market factors (e.g., increased competition).

Business Business

Liquidity Expansion

Life Insurance DEMUTUALISA TION Product

GAAP Diversification

REGULATORY VOLUNTARY CONSUMER

CHANGE DISCLOSURE DEMAND

Insurance CORPORATE Market

Regulation TAKEOVERS Competition

Market Economies

Expansion of Scale

Source: Derived from various sources ( e.g . , Miles & Gubbay, 1987; Field,199 1 ; Ries, 1992).

to have staged a more credible defence. Furthermore, greater disclosure could have prevented the target company from being "under-valued" and would have resulted in the shareholders of Pearl Assurance being offered a price per share which reflected more closely the underlying value of the fIrm. As in other jurisdictions, the New Zealand life insurance industry has also witnessed takeover activity in recent years. For example, in 1989 the Prudential acquired General Accident Life and Sun Alliance Life took over the New Zealand operations of Royal Life.

(d) Product-market factors

Increasing competition and greater product diversifIcation within a rapidly changing insurance market has led policyholders, shareholders and other investors in many countries to demand more information on the type and performance of life insurance products through various disclosure media, including the annual report (Miles &

Gubbay, 1987). Indeed, in several countries this phenomenon is mirrored across other (non-insurance) sectors of the economy (Gibbins et al. , 1992). Over the last decade or so, the New Zealand life insurance market has also been subject to greater consumer awareness and increased market competition, particularly from the insurance activities of trading banks and other new entrants (Adams, 1994c). Therefore, product-market considerations are likely to be important motivating factors in making the level of corporate disclosure a salient issue in the New Zealand life insurance industry.