Tecnológico de Monterrey, Campus Ciudad de México, Mexico D.C., Mexico **

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1 Produc Specalzaon Effcenc and Producv Change n he Spansh Insurance Indusr Hugo Fuenes * Eml Grfell-Tajé ** and Sergo Perelman *** * Tecnológco de Monerre Campus Cudad de Méco Meco.C. Meco ** eparamen d Economa de l Empresa Unversa Auònoma de Barcelona Bellaerra Span *** CREPP Unversé de Lège Lège Belgum November Absrac In hs paper we analze he levels of echncal effcenc and producv growh aaned b Spansh nsurance companes durng a perod of deregulaon. We compue Malmqus producv ndees usng he esmaes of paramerc dsance funcon for several specalzed nsurance branches. In hs wa we show ha branch specalzaon maers a grea deal and ha frms combnng wo or hree produc lnes (Healh Proper-Lables and Lfe) perform beer han frms operang n one nsurance lne eclusvel. In he lgh of hese resuls we recommend ha he remanng resrcons comng from he European Thrd recves on he operaons of mul-branch frms should be removed. Moreover from a managemen pon of vew would be approprae o encourage he creaon of mul-branch nsurance frms. However n all cases he esmaed scores ndcae low producv growh (less han % per ear) compared wh a huge ncrease n nsurance acv (premums were mulpled b nearl 3 n a decade). JEL classfcaon: 4 C43 G Kewords: Effcenc paramerc Malmqus nde oupu specalzaon Spansh nsurance Acknowledgmens: The auhors are graeful for fnancal suppor from Mnsero de Cenca Tecnología. SEJ C03-0/ECON 005SGR 0083 from he Generala de Caaluna and Fonds de la Recherche Fondamenale Collecve (FRFC ) are also acknowledged. An errors ha reman are our own.

2 . Inroducon In hs paper we analze he levels of echncal effcenc and producv growh aaned b Spansh nsurance companes durng he decade from 987 o 997. Ths perod whch followed Span s enr no he European Unon (EU) was characerzed b a huge deregulaon process n European fnancal markes and consues an ecellen framework n whch o sud he effec of reforms devoed o nroducng greaer compeon n he nsurance ndusr. However he evoluon of nsuons and he adapaon of frms and consumers o he new rules fed b European Unon recves s a process ha wll ceranl ake more han one decade o acheve. For hs reason we consder he perod as a whole whou makng a dsncon for he ear of nroducon of new regulaons. espe he mporance of he Spansh nsurance ndusr has been he objec of scan aenon. One ecepon has been n he feld of sraegc managemen and markeng wh research b Marnez (995) Lado Cousré and Marnez (997) Lado Cousré and Madeu-Olvares (00) Madeu-Olvares and Lado Cousré (003) and Marnez Albarrán and Camno (00). Ths suaon conrass wh he Spansh bankng secor n whch a generous sream of research has been carred ou n all areas. Some of hs research has focused on analzng he mpac of he deregulaon process on he Spansh bankng secor. For eample Vves (990) suded he relaonshp beween deregulaon and compeon; Fuenelsaz Gomez and Polo (00) focused on geographc dversfcaon; Purro and Salas (00) eamned sraegc behavor; Llodwllams and Molneu (994) nvesgaed marke srucure; Grfell-Tajé and Lovell (999) researched prof generaon and fnall Fuenelsaz and Gomez (00) consdered he effecs on he bankng secor of Span s decson o ener he EU. Oher sudes on he Spansh bankng secor have analzed he consequences of EU deregulaon on he levels of effcenc and producv change whn fnancal servces bu have obaned conroversal resuls [.e. Pasor (995) Grfell-Tajé and Lovell ( )]. To dae he consequences of EU deregulaon n erms of effcenc n he case of he Spansh nsurance marke have been analzed onl b Fuenes Grfell-Tajé and Perelman (00) and Cummns Rubo-Msas and Z (004). Cummns e al. (004) calculaed he echncal cos and revenue effcenc of he Spansh nsurance secor n he perod from 989 o 997 pang specal aenon o he nsuonal forms: sock and muual. The repored a ver low level of cos and revenue effcenc a lle hgher han 5% bu wh a beer score of close o 50% n he case of echncal effcenc. These resuls undoubedl demonsrae ver poor performance b he Spansh nsurance ndusr. Wh regards o he nsuonal form he auhors esed he effcen srucure hpohess. Ths hpohess predcs ha here wll be no sgnfcan effcenc dfferences beween socks and muuals. Ths mples ha frms of dfferen pes are lkel o be characerzed b dfferen operang echnologes adaped o he marke secors n whch he have a comparave advanage. The resuls on hs pon are unclear because alhough Cummns e al. found srong suppor for hs hpohess based on he scores of echncal effcenc he also found weaker suppor when lookng a he scores of cos and revenue effcenc. On he oher hand he auhors rejeced he epense preference hpohess whch predcs ha muuals wll fal o mnmze coss or mamze revenues due o unresolved agenc conflcs. Fuenes e al. (00) analzed he effcenc and producv of Spansh nsurance companes operang smulaneousl n hree produc lnes: Healh Proper- Lables and Lfe durng he perod

3 Ths paper complees he sud b Fuenes e al. n he followng was. Frs covers all he nsurance companes n all he branches operang n he Spansh nsurance marke and second eends he perod of sud o cover he en ears from 987 o 997. Ths was a decade of srong deregulaon n he nsurance ndusr because followed Span s enr no he EU. The paper also complemens he sud b Cummns e al. (004). Frsl we focus on he managemen decson o produc.e. he specalzaon of nsurance frms. These frms are no onl specalzed n erms of he dfferen lnes of producs he offer Healh Proper-Lables and Lfe bu specalzaon also apples o he wa each frm combnes hese produc lnes. Gven he dramac dfferences n he naure and operaon of hese nsurance acves each one of hese combnaons wll be consdered here as a specalzed branch and wll be analzed separael. Therefore we dvde he whole nsurance marke no several specalzed branches composed of frms operang eclusvel n one produc lne or n a combnaon of hem. The resuls we oban show ha belongng o one or oher of hese specalzed branches maers greal n a perod of deregulaon as observed n he Spansh and European markes. More precsel he nsurance companes operang smulaneousl n hree produc lnes or n wo of hem were shown o perform beer han hose specalzng n onl one. In hs produc specalzaon approach we perform a comparave analss of frms ha have adoped dfferen nsuonal forms. I appears ha muuals are more echncall effcen han prvae (sock) companes bu no clear dfference appears n erms of producv change. Here agan wha reall maers s branch specalzaon. Frms ha appear o ake less advanage of he deregulaon process are hose ha operae n jus one produc lne. Ths s rue n he case of prvae companes operang eclusvel n he Healh branch and muuals operang manl n he Proper- Lables branch. Secondl n hs paper we calculae echncal effcenc as well as producv change usng paramerc Malmqus ndees. We appl he paramerc sochasc mehodolog whch s based on dsance funcon esmaons. Ths mehodolog allows he decomposon of producv growh no hree effecs: echncal effcenc change echncal change and echncal change due o oupu-m or npu-m bas. Our resuls show ha durng he perod covered he man source of producv growh n he Spansh nsurance secor was unbased echncal change or n oher words neural shfs of he producon froner. Thrdl we defne nsurance acv as a producon process n whch he oupus are defned b he capac of he companes o collec premums and we onl consder he npus ha have a drec relaonshp wh hs acv. Proceedng n hs wa we rel more closel on he radonal vew of he nsurance ndusr whch neglecs he performance of nsurance companes n he fnancal markes and he revenue generaed b hese acves. The resuls we oban ndcae ha producv growh was lower han % per ear durng he perod Ths means ha n spe of an eceponal epanson of he Spansh nsurance marke durng hs perod (aggregae premums were mulpled b nearl 3) he secor performed poorl n erms of producv growh. Insurance companes compensaed for hese poor resuls wh he gans he obaned n he fnancal markes whch performed eceponall well n he nnees. Ths paper s organzed as follows. Secon s devoed o he mehodolog. Here we presen succncl he paramerc sochasc Malmqus producv nde and s decomposon based on he paramerc esmaon of an ner-emporal dsance 3

4 funcon. In Secon 3 we deal he wa n whch we dvded he nsurance ndusr no specalzed branches and how he correspondng samples were creaed. In ha secon we also analze he mporance of nsuonal forms hrough branch specalzaon as well as he oupu and npu defnons ha we adop for esmaon purposes. Here we also eplan he reasons ha nduced us o neglec one parcular caegor of lfe-nsurance producs sngle premum as par of hs sud. In Secon 4 we presen he man resuls for each specalzed branch and pe of nsuon. These resuls nclude echncal effcenc levels and producv growh ndees wh her correspondng decomposon analzed over me. The las secon conans he man conclusons.. The paramerc sochasc Malmqus producv nde.. The Malmqus producv nde Le denoe a srcl posve vecor of N npus used o produce a srcl posve vecor of M oupus n he perod =...T. A basc represenaon of he producon echnolog b whch npus are used o produce oupus s provded b P ( ) = { : s obanable from } =...T. () P ( ) s assumed o be closed bounded conve and o sasf a srong dsposabl of npus and oupus. A funconal represenaon of he srucure of producon echnolog for a panel of =... I producers s provded b Shephard's (970) oupu dsance funcon O ( ) = mn{θ: ( /θ) P ( )} =...T. () O ( ) provdes a measure of he dsance from ( ) o he boundar of P ( ) he dsance beng measured radall n he oupu drecon. O ( ) wh O ( ) = f and onl f s echncall effcen n he sense ha s on he boundar of P ( ). In fac he oupu dsance funcon s he recprocal of he ebreu (95) Farrell (957) oupu-orened measure of echncal effcenc. We refer o O ( ) as a whn-perod oupu dsance funcon; adjacen-perod oupu dsance funcons o( + + ) o + ( ) o ( + ) and o + ( + ) are defned analogousl. Snce eamnng daa from one perod ma or ma no be feasble wh adjacen-perod echnolog he oupu dsance funcons can ake values greaer han equal or less han un. Therefore an oupu-orened + + Malmqus producv nde M O ( ) for producer beween perods and + usng perod echnolog as a reference can be wren as M O ( + o )= o o o 4

5 5 ( ) ( ) = T. TE. (3) The frs componen on he rgh sde of (3) measures he conrbuon of echncal effcenc change o producv change. O + ( + + ) > =< O ( ) dependng on echncal effcenc mprovemens sas unchanged or declnes beween perods and +. The second componen measures he conrbuon o producv change of echncal change calculaed along a ra hrough perod + daa. O ( + + ) > =< O + ( + + ) dependng on echncal progress sagnaon or declne occurs beween perods and +. Färe Grosskopf Grfell-Tajé and Lovell (997) propose an addonal decomposon of he echncal change elemen + = + + o T O o o o o o o o o... = IB OB T. (4) The frs elemen ( ) T measures echncal change for unchanged oupus and npus.e. wh perod daa. The second elemen defnes he oupu bas nde ( ) + + OB whch compares he shf of he oupu se correspondng o he producer s change n oupu combnaons from perod o perod +. The hrd epresson defnes he npu bas nde ( ) + IB. Ths compares shfs of he oupu se n perods and + correspondng o changes n he bundle of npus. The bas componens make no conrbuon o producv change f echncal change s neural. Furhermore here s no oupu bas effec or npu bas effec n he case of one oupu or one npu see Färe e al. (997). All hree componens are greaer han equal o or less han un dependng on wheher he conrbue posvel no a all or negavel o echncal change... Calculang he Malmqus producv nde The oupu dsance funcons and b eenson he Malmqus producv nde and s decomposon are usuall calculaed usng lnear programmng echnques see for eample he poneerng papers of Färe Grosskopf Lndgren and Roos (99 994[989]). Fuenes e al. (00) have nroduced he paramerc sochasc Malmqus producv nde where he oupu orened dsance funcon s defned n a ranslog form as n Coell and Perelman (999). The ranslog specfcaon of a mul-

6 oupu mul-npu echnolog wh echncal progress defned n he usual form as a rend varable s gven b: ln O ( K K K K M ) = α 0 + α k ln k + α kl ln k ln l + δ km ln k ln m k = k = l= k = m= M M M β ln ln ln m m + β mn m n + γ + m= m= n= + K γ + η k ln k + µ m ln m =... I; =... T. (5) k = M m= The soquan of he oupu se corresponds o: ln O ( ) = 0 [.e. O ( ) = ] and he neror pons o: < ln O ( ) 0 [.e. 0 < ( ) ]. The parameers of he funcon ndcaed n Greek leers O mus sasf a se of resrcons: frs he usual resrcons for smmer are appled = α mn =...M β = β kl=...k and second homogene of degree α ( ) ( ) mn nm kl lk K + n oupus are mposed: α = ; α = 0 k... K; δ km = 0 k =... K ; M m= M n= k= k K l= kl = µ = 0 and hrd we also mposed homogene of degree + n npus: β = ; m β = 0m =...M; δ = 0 m... M. mn K k= km = Homogene of degree + n oupus s mposed n order o oban an oupu orened radal dsance funcon. Homogene of degree + n npus mples consan reurns o scale echnolog an assumpon necessar o accurael measure producv change. Grfell-Tajé and Lovell (995) showed ha n he presence of non-consan reurns o scale he Malmqus nde does no correcl measure producv varaon. Ths was also confrmed b Färe and Grosskopf (996: 54) who demonsraed ha a Malmqus nde s a producv nde f and onl f s defned on a echnolog of consan reurns o scale. Eendng Lovell Rchardson Travers and Wood (994) can be shown ha homogene of oupus and npu mples: O ( ) ω ( ω ) λ = O for an ω > 0 and λ > 0. (6) λ Therefore s possble o mpose homogene on oupus and npus b choosng arbrarl one of he oupus e.g. and one of he npus e.g. and defnng ω = M and λ. = K M If we epress he rgh hand sde of (5) as TL( ;θ ) where θ = ( α β δ γ η µ ) s a vecor of parameers and ake no accoun he equal (6) epresson (5) can be rewren as: M m= K M m= m 6

7 ( ) ( TL ) ( = ; ln ) ln θ. (7) M K Seng ( u ln ) K M = O and addng a sochasc erm we oban Agner Lovell and Schmd s (977) represenaon of a paramerc sochasc froner: ^ ( ) = TL ; θ + ε ln M K K M ε = u + v (8) O where ε s a composed error erm allowng for neffcenc n producon ( u ) and for nose ( v ) and ˆ θ = ˆ α ˆ β ˆ δ ˆ γ ˆ η ˆ µ he esmaed parameers. The neffcenc error s assumed o be a negave random erm ndependenl dsrbued as runcaons N ϕ σ dsrbuon. The nose erm s smmercall dsrbued and a zero of he ( u ) assumed o be d [ N( 0 )] σ. Boh erms are ndependenl dsrbued ( σ = 0) v uv. The predced value of he oupu dsance funcon for producer n perod can hen be esmaed as a condonal epecaon: [ ( )] [ ( ) ] Φ( σ A χε σ A ) O = E ep u ε Φ( χε σ ) ( χε + σ ) A A = ep (9) where σ A = χ( χ ) σ σ = σ u + σ v χ = σ σ u and Φ (.) represens he dsrbuon funcon of a sandard normal random varable. Noe ha condonal epecaon (9) s a modfcaon of Jondrow e al. (98) and Baese and Coell (988) as nroduced b Coell (996). Once he parameers of equaon (8) have been esmaed (ndcaed wh has) he Malmqus producv nde and s decomposon can be calculaed. Followng Fuenes e al. (00) we have n he case of echncal effcenc change: TE ( ) = ep[ TL( + ; ˆ θ ) TL( ; ˆ θ )] (0) The echncal effcenc s calculaed as he rao of wo successve dsance funcons. In a smlar wa we can epress he echncal change wh perod + daa: ln T ( ) = TL( ; θˆ ) TL( + ; θˆ ). () The echncal change effec wh perod daa T( ) can be calculaed n he same wa as () bu usng perod daa nsead of perod + daa. As shown n equaon (4) T( + + ) can be addonall decomposed no he produc of an oupu bas effec and an npu bas effec. The epressons of hese wo effecs are: OB IB M ( ) ep ˆ [ ln ln ] = µ m m m () m = K + + ( ) [ ] ep ˆ ln ln = η k k k. (3) k = 7

8 Below we sud he effcenc and oal facor producv change of he Spansh nsurance ndusr over he pos-deregulaon perod. We follow he paramerc sochasc Malmqus approach presened n hs secon where echncal effcenc s measured b epresson (9) and echncal effcenc change echncal change oupu bas effec and npu bas effec b epressons (0) () () and (3) respecvel. 3. Spansh nsurance daa 3.. Produc specalzaon n he Spansh nsurance ndusr In he Spansh nsurance marke we can denf hree lnes of producs: Healh Proper-Lables and Lfe 3. One nsurance compan ma specalze n one of hese groups of oupus or ma offer a combnaon. In fac we have four possble combnaons: ) Healh & Proper-Lables; ) Healh & Lfe; ) Proper- Lables & Lfe and v) Healh Proper-Lables & Lfe. Thus s possble o nvesgae he nsurance ndusr b lookng a he decsons aken regardng specalzaon. Ths approach allows us o spl he Spansh nsurance marke no seven groups or branches and o sud hese branches separael nsead of ogeher. In addon wh hs approach we nroduce he possbl ha each branch ma have a dfferen knd of echnolog. In oher words he characerscs of an nsurance compan organzaon could change dependng on he produc lnes ha offers. As a resul adapaon o a deregulaed marke could be dfferen beween he branches. As we shall see n hs sud we fnd a dfferen level of effcenc and of producv change dependng on he branch. Moreover we sud wheher here has been a move o specalzaon as a manageral answer o a more compeve envronmen. We can follow hs mul-branch approach because we combne wo sources of nformaon whch allows he allocaon of one nsurance compan o each one of he seven possble branches. The daa we use n hs paper descrbes he operang performance of Spansh nsurance companes durng he perod We colleced he daa from wo sources of nformaon. The frs was he annual Balance Cuenas de Pérddas Ganancas whch s ssued b he Spansh regulaor reccón General de Seguros (GS). Ths nsuon publshes he accounng nformaon of he Spansh nsurance companes ha regulaes (we wll reurn o hs pon laer). The second source of nformaon was from he nsurance rade assocaon Unón Española de Endades Aseguradoras Reaseguradoras (UNESPA) whch unl 997 used o publsh annuall he Esadísca de Seguros Prvados. Jonng ogeher hese wo dfferen sources of nformaon allows he mul-branch approach followed b hs paper. Unforunael s no possble o eend he sud afer 997 because UNESPA has no publshed he Esadísca de Seguros Prvados snce 998. Addonall here was also a change n he accounng rules n 998 whch due o he defnons of oupus and npus makes dffcul o mach he accoun saemens before and afer hs ear. UNESPA used o collec nformaon from s assocaes usng a quesonnare. Somemes he compleed quesonnare from an nsurance compan faled o arrve on me. Under hese crcumsances he daa from ha parcular compan was no publshed. Consequenl he number of companes covered b UNESPA was alwas 8

9 lower han was he case n he GS nformaon. For hs reason we los on average 9% of he observaons as a resul of he negraon of he wo daa ses 4. Neverheless he remanng nsurance companes can each be classfed no one of he possble seven branches. The frs observaon we can make from hs process of allocaon s ha wo branches are almos emp. There are onl wo observaons per ear n he Proper- Lables & Lfe branch and fve per ear n he Healh & Lfe branch. For hs reason hese wo branches are no ncluded n hs sud. A he end of hs frs sage we have a sample of 403 observaons where (see Table ) appromael 33% on average of he companes are n he Healh & Proper-Lables (H&PL) branch; % n he Healh Proper-Lables & Lfe (HPL&L) branch; 9% n he Healh branch; 6% n he Proper-Lables (PL) branch and fnall % n he Lfe branch. The Spansh lfe nsurance branch presens specal characerscs. I s for hs reason ha we pa parcular aenon o hs branch laer. 3.. Insuonal forms In he Spansh nsurance marke we can fnd wo nsuonal forms: prvae (or sock) and muual. In he prvae nsuonal form hree dfferen knds of frms can be found: prvae nsurance companes foregn rade branches and rensurance companes. However he wegh of each of hese n he Spansh nsurance ndusr s dfferen. In he daa se he prvae companes represen appromael 79% he muual 6% he foregn rade branches 5% and fnall he rensurance companes have a resdual wegh. Rensurance companes are ecluded from hs sud because we beleve ha he have specal characerscs ha make hem ncomparable wh he oher nsuonal forms. Span s a decenralzed counr n whch he cenral governmen has graned o some regons full responsbl for some ssues among hem he supervson of muuales. The muual form s ver mporan n Caalona and he Basque Counr bu unforunael nformaon abou hese muuales s no avalable. Ths s because GS could no provde us wh nformaon abou hese wo mos ndusralzed regons. As a resul he rue wegh of he muual form n he Spansh nsurance ndusr s no represened: should be hgher han he 6% shown here. In hs wde sample of 403 observaons we can oban a clear pcure of he srucure of he Spansh nsurance ndusr and s evoluon wh regard o he nsuonal form. Table shows he composon of he ndusr b nsuonal form and branch. In he case of muual companes on average 78% of hem are found n wo branches: PL and H&PL. Bu he rends of hese wo branches durng he perod of sud were ver dfferen. Muuales reduced her wegh sharpl n he PL branch bu ncreased markedl n he H&PL branch 5. The remander are manl n he HPL&L branch. Muual companes almos dsappeared n he Healh branch and he Lfe branch a he end of he perod 997. These resuls sugges ha muuales had been concenrang her acv n branches wh wo or more lnes of producs leavng he ones wh onl one produc lne. The dsrbuon of he prvae companes s dfferen wh on average 30% n he H&PL branch 3% n he Healh branch % n he HPL&L branch 3% n he Lfe branch and fnall % n he PL branch. The wegh n he PL branch H&PL branch and HPL&L branch remaned sead over he perod. B conras clmbed seadl n he case of he Lfe branch as he wegh wen from 4% n 987 o 5% n 997. A 9

10 ver dfferen form of behavor can be observed n he case of he Healh branch where he proporon of healh nsurance companes n he prvae form declned from 9% n 987 o 0% n 997. The eplanaon for hs declne les manl n he mporan process of mergers and acqusons whch occurred n he Healh branch durng he perod of sud. The foregn rade branches are manl concenraed n wo pes of acv: on average 6% of hem are n he H&PL branch and % n he Lfe branch. The remander are spread hrough he oher branches. However s no possble o eend he sud of he foregn rade branches afer 994. We los he nformaon abou hese companes n he remanng ears as a resul of he process of jonng he daa ses from GS and UNESPA. The prvae nsurance companes are almos he sole nsuonal form n he Healh branch and Lfe branch (see Table ) alhough n he laer branch here s a modes represenaon of on average 8% of foregn rade branches. Muuales accoun on average for 37% and prvae companes for almos all of he remander of he PL branch. The share of he muual form s onl 5% n he HPL&L branch. Consequenl he prvae companes are he prevalng nsuonal form n hs branch. The onl suaon where he hree nsuonal forms are well represened s n he H&PL branch wh on average 7% of he Spansh prvae companes 0% of he muuales and fnall 8% of he foregn companes Inpus and oupus In he nsurance leraure here s a lack of agreemen on defnng he oupu of an nsurance compan. There are wo man endences dealed n he leraure: phscal and monear. In he former he oupu s defned b he number of polces n force (Burgess and Waler 98). In he laer we can fnd manl wo approaches: ) value added (Berger and Humphre 993) and ) premums (Fecher e al. 993). All hese dfferen approaches o he defnon of wha an nsurance compan produces have advanages and dsadvanages. Ths paper focuses on specalzaon n he nsurance ndusr and consequenl he non-lfe produc has been spl no healh and proper lables. For hs reason here are consrans on he nformaon avalable. As a resul s no possble o follow he phscal and he value added approaches. Moreover we are parcularl crcal wh respec o he proes adoped n he value added approach n he sudes of effcenc and producv n he nsurance ndusr. In he value added approach and from a praccal pon of vew losses and he epeced value of loss clams are used as one of he proes of he servces provded. We beleve ha hs approach has wo mporan lmaons. Frs s possble ha poorl managed nsurance frms wll choose a non-opmal clen porfolo and consequenl have o face huge losses and collapse. espe hs he ma sll be denfed as one of he mos effcen and producve nsurance companes. The second lmaon of he value added approach s ha akes no accoun random flucuaons such as naural dsasers or errors aacks. The nsurance companes ha operae n Spansh error mus cover he damage caused b errors aacks. Ths s somehng ha ma no be he case n oher EU counres. Cummns e al. (004: 330) recognzed hs problem even hough he heorecal jusfcaon for usng premums as oupu s no as srong as for losses premums are hghl correlaed wh epeced losses and hence provde an alernave oupu measure ha s less subjec o random flucuaons. Thus n hs sud oupus are defned b oal annual premums b each one of he hree lnes of producs. Addonall and quong Fecher e al. (993: 8) 0

11 premums reflec he abl of an nsurance compan o marke producs o selec clens and o accep carrng rsks... premums represen he value ha free wllng consumers arbue o he nsurance servce he are seekng. Furhermore we follow a classcal producon pon of vew n whch oupus are compared wh he npus needed n he producon process. I means ha we have ecluded an revenue or epense wh s orgn n he fnancal marke. Isolang he measures of effcenc and producv of he ups-and-downs of he fnancal markes we epec ha he onl reflec he operang behavor of he nsurance frm. The Spansh Lfe caegor has pecular characerscs ha are dscussed n deal n he ne secon. On he npus sde we have denfed wo pes: labor cos and operang epenses. Labor cos s defned b he wage bll as well as b he commssons pad o nermedares and operang epenses b he sum of non-labor operang epenses whch nclude drec ependure on buldngs and amorzaon epenses. Unforunael here s no enough accounng nformaon o spl operang epenses no ependure on maerals and ependure on buldngs. Bu he adoped defnon of npus s a well known approach n boh nsurance and bankng leraure see for eample Fecher e al. (993) and elhausee e al. (995) n he frs case and Grfell- Tajé and Lovell (997) n he second 6. In defnng oupus and npus b her value nsead of b phscal erms such as he number of conracs he varables depend on varaons boh n prce and n quan. The correc wa o solve hs problem s o have oupu and npu prce varaon boh n each pe of oupu and npu and across nsurance companes. Unforunael hs nformaon s no avalable because here s no specfc prce nde for he Spansh nsurance ndusr. Gven hs lack of nformaon we have deflaed oupus and npus o he begnnng of he perod of sud 987 usng he Spansh Consumer Prce Inde The Lfe caegor In he Lfe caegor we can dsngush beween renewal premums and sngle premums. The laer were nroduced for he frs me n 986 as a new wa of savng wh a advanages bu he provde poor nsurance servces 7. The nroducon of sngle premums had an enormous mpac on he Spansh fnancal marke. A he end of he ear of her nroducon 986 he oal number of sngle premums was more han rple ha of renewal premums and from 986 o 988 grew o abou 95% 8. Bu sngle premums were revealed as an opaque a nvesmen and araced some mone from he black econom. In 989 he Spansh Treasur eparmen decded o recf hs suaon and modfed he sngle premums law 9. As a consequence he annual premums of 989 fell o abou half he level of hose of Because of hese hsorcal crcumsances and he poor nsurance servces offered b sngle premums we decded o eclude hem as a produc n he Lfe caegor. Thus he Lfe branch s defned b renewal premums whch are convenonal nsurance producs. As we have alread seen wo branches nclude he lfe produc: he Lfe branch self and he HPL&L branch. Neverheless n he case of he Lfe branch we found such a dsperson among he daa of he nsurance companes ha hs persuaded us o pospone he effcenc and producv analss of hs branch. The dsperson s probabl due o he fac ha he Spansh commercal banks and savngs banks are he owners of abou half of he Lfe nsurance companes. Thus lfe producs mgh be sold usng a commercal bank or a savngs bank branch nework. As a resul he real

12 revenues and real epenses mgh no be approprael accouned for b he nsurance companes. Consequenl hs paper measures he effcenc and producv change of he Spansh nsurance ndusr durng he perod focusng on four branches: ) Healh; ) Proper-Lables (PL); ) Healh & Proper-Lables and fnall v) Healh Proper-Lables & Lfe The sample Basng our approach on he adoped defnons of oupus and npus we checked he daa se lookng for nconssences such as here beng no nformaon abou one npu or one oupu or ncongru n he paern of he oupus or he npus. In addon we also ecluded hose nsurance companes wh fewer han fve observaons durng he perod. Ths sud was fnall carred ou wh a sample of 677 observaons n he Healh branch 570 n he PL branch 84 n he H&PL branch and 590 n he HPL&L branch. Ths represens 55% of he nsurance companes and 6% of he oal annual premums ecludng he Lfe branch as obaned from he GS nformaon. Lookng a he nsuonal form he percenages of represenaon n he sample are close o hose ha we prevousl calculaed (Table ) n he Spansh nsurance ndusr. Table shows he number of nsurance companes per ear and b branch as well as he arhmec mean and he sandard devaon of he oupus and npus. The frs hng ha srkes us s he small sze of Spansh nsurance companes a he begnnng of he perod of sud 987. Thus should no be surprsng ha a common feaure n Table s he sharp ncrease n he sze of he nsurance companes whn each branch. One eplanaon for hs behavor s he mporan process of mergers and manl acqusons whch ook place durng hs perod. We have esablshed ha appromael 9 over 358 frms were nvolved n a leas one merger or acquson durng he perod Moreover hs sze ncrease s accompaned b a decrease n s dsperson as evdenced b he oupu coeffcen of varaon (sandard devaon/arhmec mean). Bu hs decreasng endenc does no reduce suffcenl he oupu coeffcen of varaon and hs sll reflecs a he end of he perod a huge sze dsperson boh b varable and b branch. Consequenl he four branches n our sample conan boh ver small and ver large nsurance companes. Oher feaures can be hghlghed from Table. The Healh branch shows he hghes ncrease n annual premums whle he Proper-Lables lne n he H&PL branch presens he lowes ncrease over he perod. In all he cases labor s he hgher cos bu he proporon ha represens wh respec o he oal cos vares beween branches and over me. As a resul here are mporan dfferences n he average npu m beween he branches. Alhough hs nformaon s no n Table we have found a huge dsperson n he npu m whn each branch. Ths dsperson could be an ndcaon ha here are no producv gans assocaed wh he choce of npu m. One srkng aspec of Table s ha specalzaon n onl one lne of producs does no mean he aracon of a larger amoun of premums. Ths s rue n he case of he PL branch where he annual average premums for he whole perod are lower han half he proper-labl premums n he H&PL and HPL&L branches. In conras he Healh branch presens he hghes premums f we compare wh he oher wo mul-branches offerng he healh produc. Also worh of noe s ha he average healh premums ncrease sharpl n he Healh branch. The ncrease s also sgnfcan n he H&PL and HPL&L branches bu s lower n hese cases han n he Healh branch. Thus we have wo ver dfferen suaons. In he frs specalzaon n onl one lne of producs proper-lables does no mpl a faser growh. In he

13 second suaon specalzaon n he healh produc allows a faser growh hrough new nsurance polces. 4. Effcenc and producv varaon b branch In hs secon we eamne echncal effcenc and producv change and her componens n each of he specalzaon branches. Our am s o calculae he level of echncal neffcenc and producv change n each branch separael and o arbue calculaed producv varaon o he change n effcenc and echncal progress. Addonall we decompose he echncal change componen no he produc of hree ndees: he frs measures he echncal progress usng perod daa he second epresses an npu bas effec and he hrd an oupu bas effec see equaon (4). In he case of branches wh onl one produc lne he laer effec he oupu bas effec does no es. As we shall see he producv behavor of each one of he branches s que dfferen and hs jusfes analss hrough eamnaon of specalzaon n he nsurance ndusr. 4.. sance funcon esmaon Table 3 presens he esmaed parameers branch b branch. The four dsance funcons were esmaed under he assumpon of lnear homogene of npus and oupus. Ths assumpon mples consan reurns o scale and smlar resuls ndependenl of he orenaon chosen. For hese esmaons we rel on he Baese and Coell (988) verson of he sochasc froner model proposed b Agner Lovell and Schmd (977) and Meeusen and van den Broeck (977). The Froner program was used for esmaon (Coell 996). Underlned parameers were calculaed b applng he homogene condons. Noe ha for nsurance companes specalzng n onl one produc lne he esmaed dsance funcon s equvalen o a ranslog producon froner. In he mulple-branch cases one lne ( : Proper-Lables) was seleced as he normalzed varable 3. Frs order parameers on npus have he correc sgn (mulpled b ) and correspond o paral elasces of he dsance funcon evaluaed a he mean.e. paral elasc wh respec o he labor facor vares from 0.47 n he Healh branch o n he PL branch. Moreover he paral elasces wh respec o producs ndcae for mulple produc branches and a mean values he share of each produc on producon mprovemen e.g. n he hree produc lne branch Lfe has he lowes share (0.066) compared wh Healh (0.460) and PL premums (0.474) 4. Overall he resuls for he wo mul-produc branches are beer on sascal grounds han hose obaned wh he sngle branches. Mos parameers are sgnfcan a he 5% level ncludng hose ha ncorporae he rend varable () and are assocaed wh echnologcal change. For he Healh and PL branches he resuls are less conclusve n parcular for echnologcal change ha appears o be sascall nonsgnfcan. In addon for he Healh branch he share of he neffcenc componen of he oal error varance s raher hgh ( λˆ =0.939) n comparson wh hose of oher branches and n hs case onl he neffcenc erm dsrbuon appears o be runcaed a a value no equal o zero (ϕˆ =.0). 3

14 4.. Techncal effcenc esmaon We begn our analss wh a dscusson of echncal effcenc b branch (see Table 3 for a summar of annual resuls). These resuls are based on soluons o he paramerc sochasc oupu dsance funcon gven n equaon (8). Alhough Table 4 repors arhmec mean resuls we oban a separae soluon for each nsurance compan n each one of he branches. As we can see average effcenc scores are ver dfferen among branches and he show a dfferen form of behavor. None of he four branches shows an clear rend for he whole perod Ths behavor as we shall see needs o be ranslaed no he Malmqus echncal effcenc effec whch wll show a producv growh rae close o one n all cases ecep he Healh branch. In Table 4 HPL&L has he hghes echncal effcenc scores. The average effcenc score s close o 80%. Alhough hs does no appear n Table 4 lookng a he bes and wors nsurance companes we can see ha n he HPL&L branch he bes nsurance companes have scores of hgher han 90% n each ear and he wors nsurance companes have scores of no lower han 4% n each ear ecep The average effcenc sharpl decreases when we move from HPL&L o H&PL o PL and o Healh. In he H&PL branch we oban an average effcenc score each ear of abou 7 74% and no a ver dfferen fgure 67 69% n he PL branch. The suaon s ver dfferen n he case of Healh wh a ver poor average effcenc score of abou 35 39% 6. Ths means ha wh he same consumpon of npus he Healh branch should ncrease he level of servces provded b around 60%. Ths low average score s he consequence of he dsperson of ndvdual resuls wh 5.% of he healh nsurance companes wh levels of effcenc hgher han 70% and 6% of he companes wh effcenc levels of lower han 40%. The pcure ha emerges from hese resuls s especall worrng for he Healh branch. In addon we canno provde an eplanaon for hs suaon because our aemps o fnd a cause or causes have so far faled; he varable sze of he companes for eample does no eplan he suaon 7. Fnall s worh of noe ha snce he number of produc lnes dffers beween hree of he branches and he sample ses are dfferen hrough me and across he four branches s no possble o conclude ha echncal effcenc s hgher among he HPL&L nsurance companes han among he oher nsurance companes. When daa from he four branches defnes he same producon froner a drec comparson among he effcenc levels s possble. I s approprae o conclude ha n our sample here was a beer level of echncal effcenc among HPL&L nsurance companes han among nsurance companes belongng o an of he oher hree branches Paramerc sochasc Malmqus resuls We now urn o an eamnaon of he magnude of producv varaon whn each branch. The paramerc sochasc Malmqus resuls and her componens are summarzed n Table 5. A hs pon s mporan o remember ha parameers of echncal change n he case of he Healh and PL branches are no sascall sgnfcan. Thus he echncal change effec s no repored for hese wo branches. urng he perod we can observe a dfferen rae of producv growh accordng o he nsurance branch. Producv ncreases of.5% and.7% occur n he HPL&L and H&PL branches respecvel. However he analss of producv behavor over me dffers b branch. In he H&PL branch growh durng 4

15 he frs par of he perod s followed b sagnaon and declne. On he oher hand HPL&L shows an average declne durng he frs ears and a srong recover n he las ones. More precsel n he case of H&PL we can observe on average a producv growh rae of.8% per ear unl 99. These resuls sugges a fas adapaon o he deregulaon process n he nsurance marke whch followed Span s enr no he European Unon (EU) n 986. However producv gans are more dffcul o oban when we approach he end of he perod under sud because afer 99 we can observe a modes posve rae of 0.3% per ear. B conras we oban a ver dfferen pah of resuls n he case of HPL&L. Ths branch has an average producv declne of -.0% per ear unl 99 bu hs declne s followed b an mpressve average producv growh of 3.6% per ear for he res of he perod. The resuls for hs branch ma reflec a dffcul adapaon n he ears ha followed Span s enr no he EU o a more compeve envronmen arsng from a more fleble regulaon of he nsurance ndusr. In he case of he Healh and PL branches he producv change s onl eplaned b he echncal effcenc effec because he parameers of echncal change are no sascall sgnfcan. The hree componens of paramerc sochasc Malmqus echncal effcenc change echncal change and bas echncal change provde he eplanaon for he overall measured producv growh b branch. The conrbuon of he Malmqus echncal effcenc change effec can be consder equal on average o one whch means no growh n hree of he four branches: PL H&PL and HPL&L. However he Healh branch presens a deeroraon n echncal effcenc mplng a producv declne of.8% per annum on average 8. Ths decrease s more marked afer 99 (- 3.% per ear on average). A more sgnfcan echncal change effec s shown b he H&PL and HPL&L branches. The former presens a growh rae of.7% and he laer a growh rae of.8% per ear on average. I s neresng o noe he dfferen behavor of hs echncal progress. The H&PL branch presens hs growh manl n he earl perods. Conversel he HPL&L branch shows echncal progress afer 99. Before hs ear hs branch has a slghl negave rae of echncal change. Ths s compensaed for n he second perod b a sharp echncal change growh of 3.8% per ear on average. Table 5 shows he resuls of decomposon of he echncal change componen no he produc of echncal change along a ra hrough perod daa and he bas effec. A decomposon of he bas effec no he produc of an npu bas effec and an oupu bas effec s possble n he H&PL and HPL&L branches. The resuls for he wo branches n all he ears are conclusve. Neher an npu bas effec nor an oupu bas effec occurred durng he perod of sud 9. In oher words he echncal change s neural. Under hese crcumsances an nsurance compan canno oban a producv advanage hrough he choce of he m of npus or he m of oupus. Ths resul ma eplan wh we observed a broad dsperson n he m of npus and he m of oupus n he Spansh nsurance ndusr The mpac of he nsuonal form on effcenc and producv As we saw n Table prvae nsurance companes are he man nsuonal form n he four branches alhough her wegh s dfferen. The PL branch s where he muuales have he hghes represenaon followed b he H&PL branch and he HPL&L branch. The foregn rade branch companes have onl some presence n he H&PL branch and n he sample ll 994. Table 6 summarzes he followng: he average arhmec means of echncal effcenc; he average geomerc mean of 5

16 producv change and s decomposon no echncal effcenc change; echncal change for each one of he nsuonal forms and branches durng he perod One feaure of he resuls n Table 6 warrans parcular aenon. In all cases he muual form s more effcen han he prvae form. The dfference s parcularl mporan n he H&PL branch and n he HPL&L branch where he muuales show an average score of around 8% hgher han he prvae companes. In he onl suaon where we have nformaon abou he foregn rade branches he show a ver poor average score of 68% clearl below he average of he H&PL branch. Alhough hs s no n Table 6 he nsuonal forms do no show a dfferen paern of producv change from ha of her branch. These paerns were descrbed n he prevous secon. In Table 6 we can see ha he PL branch shows on average ver close producv change resuls b nsuonal form. In conras he foregn rade branches ehb he hghes producv change n he H&PL branch and he prvae companes do so n he HPL&L branch. In boh cases hs superor performance has s orgn n he hgh scores for echncal change.% and.8% respecvel. The muuales manfes a dfferen form of behavor n he H&PL branch wh a Malmqus nde below he branch average. I s neresng o noe ha Spansh muuales on average never show a beer producv score han her branch average. Fnall here s no npu bas effec or oupu bas effec assocaed wh he nsuonal form because as we have seen he echncal change s neural n each of he hree branches. 5. Concludng observaons In hs paper we have presened a sud of effcenc and oal facor producv change n he Spansh Insurance ndusr durng he pos-regulaon perod focusng on he specalzaon of nsurance companes. We denfed hree lnes of producs: Healh Proper-Lables and Lfe. An nsurance compan ma specalze n one of hese or ma offer a combnaon. Four branches were denfed: ) Healh; ) Proper-Lables (PL); ) Healh & Proper-Lables (H&PL) and v) Healh Proper-Lables & Lfe (HPL&L). The oher hree possble combnaons were no aken no consderaon eher because he nsurance companes dd no offer such a combnaon or as n he case of he Lfe branch he daa showed deep conradcons. For each of he four branches we calculaed he echncal effcenc usng a paramerc sochasc dsance funcon and he oal producv change usng a paramerc sochasc echnque o compue and decompose he Malmqus producv nde. The levels of echncal effcenc were found o be ver dfferen dependng of he branch. The HPL&L branch showed he hghes levels whch were ver close n each of he ears o 80%. In a ver dfferen poson was he Healh branch wh a ver poor average effcenc score of lower han 40% n all he perods. Ths low effcenc score s smlar o he one esmaed for hs branch n oher European counres. The oher wo branches PL and H&PL were n a beer poson wh an average echncal effcenc level of 68% and 73% respecvel. Lookng a he nsuonal form he muual form was shown o be more effcen han he prvae (sock) or foregn rade forms. urng he perod a dfferen producv growh could be observed accordng o he nsurance branch. A producv ncrease of.5% and.7% occurred n he HPL&L and H&PL branches respecvel. The echncal change effec provdes 6

17 he man eplanaon for he producv resuls alhough he parameers assocaed wh hs effec are no sascall sgnfcan n he cases of Healh and PL branches. Moreover n he Healh branch here s a producv declne of.8% whch s oall eplaned b he echncal effcenc effec. Addonall he resuls of he decomposon of he echncal change componen no he produc of echncal change (perod daa) and he bas effec are conclusve. Neher npu bas effec nor oupu bas effec occurred n he perod of me under sud. Under hese crcumsances an nsurance compan canno oban a producv advanage hrough he choce of he m of npus or he m of oupus. In he case of he nsuonal form he prvae nsurance companes ehbed on average a producv growh slghl hgher han he muuales and for boh nsuonal forms he echncal effcenc change effec was close o one. Our fndngs have clear polc mplcaons. A prncple of he Frs recves of he European Unon was he specalzaon of nsurance frms no jus one branch. The Thrd recves relaed hs prncple because was no demonsraed n pracce ha an nsurance ssem based on specalzed frms gave beer coverage han one based on mul-branch frms. Ths paper shows ha frms combnng wo or hree produc lnes perform beer han specalzed ones. In he lgh of hese resuls he remanng resrcons f an from he Thrd recves regardng he operaons of mul-branch frms mus be removed. Moreover some knd of ncenve should be gven or a leas here should be a lfng of he hrea of penalzaon n order o encourage he ransformaon of specalzed nsurance frms no mul-branch companes. References Agner.J. C.A.K Lovell and P. Schmd (977) Formulaon and Esmaon of Sochasc Froner Producon Funcon Models. Journal of Economercs 6: -37. Baese G.E. and T.J. Coell (988) Predcon of Frm-Level Techncal Effcences wh a Generalsed Froner Producon Funcon and Panel aa. Journal of Economercs 38: Berger A.N. and.b. Humphre (993) Measuremen and Effcenc Issues n Commercal Bankng. Z. Grlches (ed.) Oupu Measuremen n he Servce Secors. Naonal Bureau of Economc Research Sudes n Income and Wealh 56 Chcago and London Unvers of Chcago Press: Burgess J. and G. Waler (98) Reurns o Scale n he Ausralan Lfe Insurance Indusr: A Commen. The Economc Record 58: Coell T.J. (996) A Gude o FRONTIER Verson 4.: A Compuer Program for Froner Producon Funcon Esmaon. CEPA Workng Paper 96/07 eparmen of Economercs Unvers of New England Armdale (Ausrala). Coell T.J. (000) On he Economerc Esmaon of he sance Funcon Represenaon of a Producon Technolog. CORE P 000/4 Unversé Caholque de Louvan. Coell T.J. and S. Perelman (999) A Comparson of Paramerc and Non-paramerc sance Funcons: Wh Applcaon o European Ralwas. European Journal of Operaons Research 7:

18 Cummns J.. and M.A. Wess (000) Analzng Frm Performance n he Insurance Indusr Usng Froner Effcenc and Producv Mehods. n G. onne (ed.) Handbook on Insurance. Kluwer Academc Press Boson. Cummns J.. M. Rubo-Msas and H. Z (004) The Effec of Organzaonal Srucure on Effcenc: Evdence from he Spansh Insurance Indusr. Journal of Bankng and Fnance 8: ebreu G. (95) The Coeffcen of Resource Ulzaon. Economerca 9: elhausse B. F. Fecher S. Perelman and P. Peseau (995) Measurng Producve Performance n he Non-Lfe Insurance Indusr: The Case of French and Belgan Markes. Tjdschrf voor Econome en Managemen 40: Farrell M.J. (957) The Measuremen of Producve Effcenc. Journal of he Roal Sascal Soce A CXX Par 3: Färe R. S. Grosskopf B. Lndgren and P. Roos (99) "Producv Changes n Swedsh Pharmaces : A Non-Paramerc Malmqus Approach" Journal of Producv Analss 3(/) June: Färe R. S. Grosskopf B. Lndgren and P. Roos (994[989]) Producv evelopmens n Swedsh Hospals: A Malmqus Oupu Inde Approach. In A. Charnes W.W. Cooper A. Y. Lewn and L.M. Seford (eds.) aa Envelopmen Analss: Theor Mehodolog and Applcaons. Kluwer Academc Publshers: Boson [hs paper was presened a he Conference on New Uses of EA n Managemen and Publc Polc Unvers of Teas Ausn Sepember ]. Färe R. and S. Grosskopf (996) Ineremporal Producon Froners: Wh namc EA. Kluwer Academc Press Boson. Färe R. E. Grfell-Tajé S. Grosskopf and C.A.K. Lovell (997) Based Techncal Change and he Malmqus Producv Inde. The Scandnavan Journal of Economcs 99(): 9-7. Fecher F.. Kessler S. Perelman and P. Peseau (993) Producve Performance of he French Insurance Indusr. Journal of Producv Analss 4: Fuenelsaz L. and J. Gomez (00) Sraegc and Queue Effec on Enr n Spansh Bankng. Journal of Economcs and Managemen Sraeg 0(4): Fuenelsaz L. J. Gomez and Y. Polo (00) Followers Enr Tmng: Evdence from he Spansh Bankng Secor afer eregulaon. Sraegc Managemen Journal 3(3): Fuenes H. E. Grfell-Tajé and S. Perelman (00) A Paramerc sance Funcon Approach for Malmqus Producv Inde Esmaon. Journal of Producv Analss 5: Grfell-Tajé E. and C.A.K. Lovell (995) A Noe on he Malmqus Producv Inde. Economcs Leers 47: Grfell-Tajé E. and C.A.K. Lovell (996) eregulaon and Producv eclne: The Case of Spansh Savngs Banks. European Economc Revew 40(6): Grfell-Tajé E. and C.A.K. Lovell (997) The Sources of Producv Change n Spansh Bankng. European Journal of Operaonal Research 98():

19 Grfell-Tajé E. and C.A.K. Lovell (999) Profs and Producv. Managemen Scence 45(9): Hornsen A. and E. C. Presco (99) Measures of Insurance Secor Oupu. The Geneva Papers on Rsk and Insurance 6(59): Jondrow J. C.A.K. Lovell I.S. Maerov and P. Schmd (98) On Esmaon of Techncal Ineffcenc n he Sochasc Froner Producon Funcon Model. Journal of Economercs 9: Lado Cousré N. and M.A. Marnez (997) Marke Orenaon and Busness Performance n he Spansh Insurance Secor. The Geneva Papers on Rsk and Insurance (85): Lado Cousré N. and A. Madeu-Olvares (00) Eplorng he Lnk Beween Marke Orenaon and Innovaon n he European and US Insurance Markes. Inernaonal Markeng Revew 8(): Lovell C.A.K. S. Rchardson P. Travers and L.L. Wood (994) Resources and Funconngs: A New Vew of Inequal n Ausrala. W. Echhorn (ed.) Models and Measuremen of Welfare and Inequal Berln Sprnger Verlag. Llodwllams.M. and P. Molneu (994) Marke-srucure and Performance n Spansh Bankng Journal of Bankng and Fnance 8(3): Marnez M.A. (995) Organzaon and Sraeg n Insurance: Emprcal Research no he Secor n Span. The Geneva Papers on Rsk and Insurance 0 (74): Marnez M.A. I. Albarrán and. Camno (00) Eecuve Managemen n Insurance Enes: A Comparave Sud of Muual Companes and Jon-Sock Companes n Span wh a Vew o he s Cenur Marke. The Geneva Papers on Rsk and Insurance 6(): Madeu-Olvares A. and N. Lado Cousré (003) Marke Orenaon and Busness Economc Performance. A Medaed Model. Inernaonal Journal of Servce Indusr Managemen 4 (3): Meeusen W. and J. van den Broeck (977) Effcenc Esmaon from Cobb-ouglas Producon Funcons wh Composed Error. Inernaonal Economc Revew 8: O Bren C.. (99) Measurng Oupu Lfe Assurance Companes. The Geneva Papers on Rsk and Insurance 6: Orea L. (00) A Paramerc ecomposon of a Generalzed Malmqus Producv Inde. Journal of Producv Analss 8: 5-. Pasor J.M. (995) Producvdad Efcenca Cambo Técnco en los Bancos Cajas de Ahorro Españolas. ocoral Thess eparameno de Análss Económco. Unversa de Valenca. Purro P. and V. Salas (000) Sraegc Compeon n Real Bankng under Epense Preference Behavor. Journal of Bankng and Fnance 4(5): Shephard R. W. (970) The Theor of Cos and Producon Funcons. Prnceon: Prnceon Unvers Press. Vves X. (990) eregulaon and Compeon n Spansh Bankng. European Economc Revew 34 (/3):

20 Table : Insuonal Forms n he Spansh Insurance Indusr Healh Lfe Proper- Lables (PL) Healh & Proper- Lables (H&PL) Healh Proper- Lables & Lfe (HPL&L) Number of observaons Muual 3% row % column 8 Number % row % column 5 Number 36% row 36% column 3 Number 4% row 0% column 67 Number 9% row 4% column 0 Number 00% row 6% column 64 Number Prvae 3% row 97% column 73 Number 3% row 9% column 4 Number % row 6% column 393 Number 30% row 7% column 96 Number % row 84% column 694 Number 00% row 79% column 30 Number Foregn Trade Branches 0% row 0% column Number % row 8% column 39 Number 9% row 3% column 7 Number 6% row 8% column 4 Number 9% row % column 7 Number 00% row 5% column 88 Number Toal 9% row 00% column 75 Number % row 00% column 466 Number 6% row 00% column 64 Number 33% row 00% column 34 Number % row 00% column 83 Number 00% row 00% column 403 Number 0