This paper examines whether the stock prices of property and casualty (P&C) insurers fully reflect information contained in earnings, cash flows and accruals, and one particular accrual-development of loss reserves. The reserve for policy losses is a major accrual for P&C firms, requires substantial judgment and is the subject of unique disclosures that reveal the a post error in management estimates. We find that investors underestimate the persistence of cash flows and overestimate the persistence of accruals for P&C insurerers, but our evidence suggests the market does not underestimate the persistence of the development accrual.
