Insurance Company Capital Structure Swaps and Shareholder Wealth
Insurance Company Capital Structure Swaps and Shareholder Wealth
Insurance Company Capital Structure Swaps and Shareholder Wealth
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Figure 3: Expected Loss <strong>and</strong> Volatility Deviations – Same Direction<br />
Examples of controlling shareholder wealth changes following capital structure swaps. The solid line corresponds<br />
with the swaps illustrated in table 5 <strong>and</strong> the dashed line corresponds with the swaps illustrated in<br />
table 4. Points on the left side of the graph correspond with swaps in which the firm issues equity <strong>and</strong> uses<br />
the proceeds to purchase reinsurance. Points on the right side of the graph correspond with swaps in which<br />
the firm sells new policies <strong>and</strong> uses the proceeds to retire equity.<br />
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