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An Investigation Into the Diversification–Performance Relationship in the U.S. Property–Liability Insurance Industry


  • This project is funded by the Katie School Research Grants. The findings reported and the views expressed in this article are those of the authors and do not necessarily reflect the position of the Katie School. We also thank the Huebner Foundation for providing data on certain variables used in this project.


This article investigates the relationship between product diversification and firm performance in the U.S. property–liability insurance industry using data over the 1994 through 2002 time period. Using various measures of product diversification and firm performance, we find that the extent of product diversification shares a complex and nonlinear relationship with firm performance. Our findings suggest that performance benefits associated with product diversification are contingent upon an insurer's degree of geographic diversification. Robustness tests using subsamples and market returns for public firms show consistent results.