Factors Influencing the Profitability of Insurance Companies: A Comparative Analysis | Lecture notes Insurance Economics

LITERATURE REVIEW

Oyo Sukarya (2018) The objectives of this research was to examine the factors that affect the

financial performance of insurance companies in Indonesia, which was viewed for the

profitability. Finding and contribution in this paper showed that leverage, equity and

management competence index proved to have a significant positive influence on size,

ownership and age and they proved to have a significant negative effect on retention ratio and

underwriting risk negatively influenced insignificantly into financial performance (ROA).

Andres Cudiamat and Jay Stephen Siy (2017) The authors highlighted that the sustainability

of the life insurance business is crucial for developing economies. The paper examined the

influence of selected firm level, industry level and macro level factors on ROA (a measure of

profitability) of Life Insurance Companies. The results show that most of the firm level factors

affected ROA while industry level and macroeconomic factors have not much effect on it.

Demis Hailegebreal (2016) The study was conducted on the determinants of profitability of

Ethiopian insurance industry. The study attempts to examine the firm specific factors which are

age of company, size of company, leverage ratio, liquidity ratio, premium growth, technical

provision, underwriting risk, solvency, re insurance dependency and tangibility of assets and

macroeconomic factors, GDP and inflation on profitability of insurance industry. The study

found that underwriting risk, technical provision, leverage and inflation have negative and

significant effect whereas other variables have statistically positive and significant relationship

with profitability of insurance industry.

Lucia Spotorno etal (2016) The article analyses the relationship between Italian life insurers’

profitability and bank affiliation. The results highlights that neither distribution efficiency nor

being bank affiliated significantly affected performance. After the start of big financial crises

both distribution efficiency and bank affiliation prove to be crucial in fostering performance.

Sisra Kumara etal (2016) The paper presents results of the determinants for life insurance in the

Central region of Sri Lanka. The paper incorporated social capital as determinant of demand for

life insurance. Results confirmed that gender, income, trust and social capital has significant

effect on demand for life insurance in the study area.

Sandra Teodorescu (2016) The paper analyzes the impact of the economy on the insurance

sector. The analysis of correlation between the studied variables reveals that is a strong

correlation between Gross Written Premiums and GDP, the number of employees, average

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LITERATURE REVIEW

Oyo Sukarya (2018) The objectives of this research was to examine the factors that affect the financial performance of insurance companies in Indonesia, which was viewed for the profitability. Finding and contribution in this paper showed that leverage, equity and management competence index proved to have a significant positive influence on size, ownership and age and they proved to have a significant negative effect on retention ratio and underwriting risk negatively influenced insignificantly into financial performance (ROA). Andres Cudiamat and Jay Stephen Siy (2017) The authors highlighted that the sustainability of the life insurance business is crucial for developing economies. The paper examined the influence of selected firm level, industry level and macro level factors on ROA (a measure of profitability) of Life Insurance Companies. The results show that most of the firm level factors affected ROA while industry level and macroeconomic factors have not much effect on it. Demis Hailegebreal (2016) The study was conducted on the determinants of profitability of Ethiopian insurance industry. The study attempts to examine the firm specific factors which are age of company, size of company, leverage ratio, liquidity ratio, premium growth, technical provision, underwriting risk, solvency, re insurance dependency and tangibility of assets and macroeconomic factors, GDP and inflation on profitability of insurance industry. The study found that underwriting risk, technical provision, leverage and inflation have negative and significant effect whereas other variables have statistically positive and significant relationship with profitability of insurance industry. Lucia Spotorno etal (2016) The article analyses the relationship between Italian life insurers’ profitability and bank affiliation. The results highlights that neither distribution efficiency nor being bank affiliated significantly affected performance. After the start of big financial crises both distribution efficiency and bank affiliation prove to be crucial in fostering performance. Sisra Kumara etal (2016) The paper presents results of the determinants for life insurance in the Central region of Sri Lanka. The paper incorporated social capital as determinant of demand for life insurance. Results confirmed that gender, income, trust and social capital has significant effect on demand for life insurance in the study area. Sandra Teodorescu (2016) The paper analyzes the impact of the economy on the insurance sector. The analysis of correlation between the studied variables reveals that is a strong correlation between Gross Written Premiums and GDP, the number of employees, average

earnings and non government domestic credit. Economic growth, rising income, the increasing number of employees and facilitating credit conditions could be some elements that would lead to sustainable growth of the insurance market. Teklit Atsbeha Berhe and Pof. Jasmindeep Kaur (2015) The purpose of the study was to identify the key factors that affect profitability of insurance companies in Ethiopia. The study suggested that managers of insurance companies as well as the policy makers in the country should take crucial measures by forming policies and strategies that aimed in improving the overall profit ability of insurers. Dr. Dharmendera Mistry and Gurmeet Singh (2015) This paper examines the determinants of maturity benefits of insurance products in India. The empirical estimates show that a long run relationship exists between maturity benefits of insurance products and the independent variables. Further it reveals that the allocation charge & fund management charge significantly influence the maturity benefit of ULIP products under the study. Prof. Nikhil Bhushan Dey etal (2015) The present analysis shows that there is significant positive relationship of underwriting risk and size with financial performance (ROE) of life insurance companies in India under the study. The study also finds there is significant negative relationship between volume of capital and leverage with ROE. Mohd. Arif (2015) This paper is an attempt to study the trends and pattern of Indian life insurance industry. The author has explored a multifold growth in this sector in terms of insurance density, amount of investment, total premium, number of new policy issued, number of offices opened etc. The author believes that life insurer required to change their strategies and offered customized product so that the untapped market can be served effectively. Ijaz Hussain (2015) This paper uses firms level data of 39 companies of insurance industry of Pakistan. The findings of study suggest that based on overall regression results macroeconomic environment, equity market conditions and inflation have a positive and significant impact on profitability of insurance companies. Priti Jha and Bindu Roy (2015) The findings of this study reveals that LIC should strived to increase its business by adopting new marketing strategies and by issuing more and more policies in order to retain its market share in the competitive scenario as well as it should make advertisement to promote and aware about its policies to the consumers.

insurer’s profitability which are investment income, underwriting profit and the overall net profit. The findings indicate that whereas gross written premiums have a positive relationship with insurer’s sales profitability, its relationship with investment income is negative one. Olja Munitlak and Co-authors (2013) This paper presents a projection of life insurance premium on the basis of linear trend parameters and correlation degree between the average net income and the amount of life insurance premium. The results indicate that there is significant influence of net income on the amount of life insurance premium of insurance companies in the Republic of Serbia. Surendra Kumar C. Gulhane (2013) The objective of this study is to evaluate and compare a performance of public and private sector life insurance companies. The result shows that LIC of India enjoys the dominance in life insurance sector. There is a significant difference in the growth of number of policies issued by public and private life insurance companies. Alok Kumar Rai and Srivastava Medha (2013) The paper attempts to assess the loyalty status of life insurance customers in India and draw comparison between public and private sector life insurance companies. The findings suggest that Indian customers do care about the public sector status of a financial service provider as it entails a sense of security and stability. Dr. Yuvaraj Sumbasivam and Mr. Abate Gashaw Ayele (2013) This paper examined the effects of firm specific factors i.e. age of company, size of company, volume of capital, leverage ratio, liquidity ratio, growth and tangibility of assets on profitability of insurance companies in Ethiopia. From the regression results; growth, leverage, volume of capital, size and liquidity are identified as most important determinant factors of profitability. The age of companies is not significantly related with profitability. Dr. Sumninder Kaur Bawa and Samiya Chattha (2013) The present study attempts to examine the financial performance of Indian life insurers on the basis of various parameters. The results of the study reveal that profitability of life insurers is positively influenced by liquidity and size and negatively related with capital. Daniel Mehari and Tilahun Aemcro (2013) The study investigated the impact of firm level characteristics on performance of insurance companies in Ethiopia. The results showed that insurer’s size, loss ratio (risk), tangibility and leverage are important determinants of performance of insurance companies in Ethiopia.

Agnes Wangui Kagun (2013) The objective of the study is to determine the relationship between firm’s characteristics i.e., size, age, premium growth and claim experience and financial performance of life insurance companies in Kenya. The study findings indicate that the variables are statistically significance to influencing financial performance of life insurance companies as indicated by the positive and strong Pearson Correlation Coefficients. Dr. Amal Yasin Amajali etal (2012) The study aimed at investigating the factors that mostly affect financial performance of Jordanian Insurance companies. The results showed that leverage, liquidity, size, management competence index have a positive statistical effect on the financial performance of Jordanian insurance companies. B. Charumathi (2012) This study tried to model the factors determining the profitability of life insurance companies operating in India taking ROA as dependent variable. The study led to conclusion that profitability of life insurance companies is positively and significantly influenced by size and liquidity. The leverage, premium growth have negative and significantly influenced the profitability of Indian life insurers. The study did not find any evidence for the relationship between underwriting risk and profitability. Dr. Arnika Srivastva etal (2012) The authors are of opinion that the growth of insurance sector in India has been phenomenal. The insurance industry has undergone a massive change over the last few years and the metamorphosis has been noteworthy. Harpreet Singh Bedi and Dr. Preeti Singh (2011) The authors attempted to analyze the overall performance of life insurance industry of India between pre and post economic reforms era. The study revealed that there is tremendous growth in the performance of Indian life insurance industry and LIC due to the policy of LPG. Hifza Malik (2011) The author investigated the determinants of profitability in insurance companies of Pakistan. Specifically this examined the effects of firm’s specific factors like age of company, size of company, volume of capital etc. on profitability proxied by ROA. The findings show that there is no relationship between profitability and age of company and there is significantly positive relation between size of company and profitability. The result also shows that the volume of capital is significantly and positively related to profitability. Naveed Ahmed and Ishfaq Ahmed (2010) The authors investigated the impact of firm level characteristics on capital structure of life insurance companies of Pakistan. The results showed

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LITERATURE REVIEW