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

Abstract 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.