Corporate Performance Measures: An Integrated Approach

Insurance companies, life and general, in Japan are confronting some of the most serious challenges in history. These are the challenges to remain solvent and attain profitability. On the investment side, interest rates remain historically low, with depressed real estate value for the past decade, and poor equity performance over a ten year period. On the liability side, competition is in tense without significant growth in markets. Furthermore, the industry is facing more regulatory changes and requirements.

In this environment, insurance companies must take remedial actions. For example, we may seek higher yielding assets, often with higher risks. On the corporate level, we may seek additional capital infusion. We may focus more on the profitability of the products and not only on market shares. Life and general companies are different in their experiences; each company has its own unique challenges and responses. But, by and large, we must explore new approaches to succeed in this adverse environment.

In this paper, I propose a new approach. This approach is to implement an integrated corporate performance measure. The proposed solution is not a tactical method that seeks immediate, but often temporary, positive results. Nor is the solution that would seek relief from government agencies.