| Title : | Determinants of profitability in Nepalese insurance companies | | Material Type: | printed text | | Authors: | Binu Tiwari, Author | | Publication Date: | 2017 | | Pagination: | 94p. | | Size: | GRP/Thesis | | Accompanying material: | 9/B | | Languages : | English | | Descriptors: | Insurance
| | Class number: | 368 | | Abstract: | Profitability is one of the most important objectives of financial management (Harrington, 2005). Analyzing the determinants of profitability of insurers has gained the importance in the corporate finance literature because as intermediaries, these companies are not only providing the mechanism of risk transfer, but also helps to channelize the funds in an appropriate way to support the business activities in the economy. However, it has received little attention particularly in developing economies (Ahmed et al., 2010).
This study attempts to examine the relationship between firm’s specific variables, macroeconomic variables and firm’s profitability of Nepalese insurance companies. The study is based on secondary data of 20 insurance companies with 140 observations for the period of 2007/08 to 2013/14. Data and information have been collected form insurance board of Nepal, annual reports of the selected Nepalese insurance companies. The research design adopted in this study is descriptive and causal comparative research design as it deals with the relationship between firm’s specific variables, macroeconomic variables and firm’s profitability of Nepalese insurance companies.
The result shows that average return on assets is highest for SGIC (9.82 percent) and lowest for NB (-2.08 percent). The average return on equity is highest for SHICL (33.15 percent) and lowest for NB (-3.66 percent). The average firm age is highest for NALIC (22 years) and lowest for SICL, PMICL, GICL, SLICL and ALICL (4 years). The average firm size is highest for LIC (Rs.13300.06 million) and lowest for NB (Rs.231.26 million). The average premium growth is highest for PMICL (2631.40 percent) and lowest for UIC (1.32 percent). The average liquidity is highest for GICL (31.28 times) and lowest for NB (0.87 times). The average reinsurance dependence is highest for HGI (72.77 percent) and lowest for LIC (0.16 percent). The average underwriting risk is highest for NB (66.96 percent) and lowest for GICL (0.55 percent). The average growth of GDP is highest in year 2008/09 (6.1 percent) and lowest in year 2007/08 and 2011/12 (3.40 percent) respectively. The analysis of inflation shows that it is highest for the year 2009/10 (15.90 percent) and the inflation is lowest for year 2008/09 (5.60 percent).
The descriptive statistics for the Nepalese insurance companies reveals that the average ROA is 4.10 percent, average ROE is 10.04 percent, average underwriting risk is 32.60 percent, average reinsurance dependence is 23.46 percent, average age is 9.7 years, average size is 2608.67 million, average premium growth is 159.65 percent, average liquidity ratio is 2.81 times, average GDP growth rate is 4.44 percent and average inflation is 9.74 percent.
The correlation matrix shows that firm age, firm size, and premium growth, liquidity, underwriting risk, reinsurance dependence and gross domestic product are positively related to profitability whereas inflation is negatively related to the profitability of Nepalese insurance companies.
The regression analysis reveals that underwriting risk has positive impact on return on assets. This indicates that higher the underwriting risk, higher would be the return on assets. Similarly, reinsurance dependence and premium growth has positive and significant impact on return on assets. This shows that higher the reinsurance dependence and premium growth, higher would be the return on assets. In addition, firm age of the firm has positive impact on return on assets. It reveals that larger the firm age of operation, higher would be the return on assets. Moreover, firm size and liquidity have positive and impact on return on assets. It observes that higher the liquidity and total assets, higher would be the return on assets. Gross domestic product also has positive impact on the return on assets which indicates that higher the gross domestic product, higher would be the return on assets. However, inflation has negative impact on return on assets.
It also reveals that underwriting risk has positive impact on return on equity. This indicates that higher the underwriting risk, higher would be the return on equity. Similarly, reinsurance dependence and premium growth has positive and significant impact on return on equity. This shows that higher the reinsurance dependence and premium growth, higher would be the return on equity. In addition, firm age has positive impact on return on equity. It reveals that larger the firm age of operation, higher would be the return on equity. Moreover, firm size and liquidity have positive and impact on return on equity. It observes that higher the liquidity and total assets, higher would be the return on equity. Gross domestic product also has positive impact on the return on equity which indicates that higher the gross domestic product, higher would be the return on equity. However, inflation has negative impact on return on assets.
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Determinants of profitability in Nepalese insurance companies [printed text] / Binu Tiwari, Author . - 2017 . - 94p. ; GRP/Thesis + 9/B. Languages : English | Descriptors: | Insurance
| | Class number: | 368 | | Abstract: | Profitability is one of the most important objectives of financial management (Harrington, 2005). Analyzing the determinants of profitability of insurers has gained the importance in the corporate finance literature because as intermediaries, these companies are not only providing the mechanism of risk transfer, but also helps to channelize the funds in an appropriate way to support the business activities in the economy. However, it has received little attention particularly in developing economies (Ahmed et al., 2010).
This study attempts to examine the relationship between firm’s specific variables, macroeconomic variables and firm’s profitability of Nepalese insurance companies. The study is based on secondary data of 20 insurance companies with 140 observations for the period of 2007/08 to 2013/14. Data and information have been collected form insurance board of Nepal, annual reports of the selected Nepalese insurance companies. The research design adopted in this study is descriptive and causal comparative research design as it deals with the relationship between firm’s specific variables, macroeconomic variables and firm’s profitability of Nepalese insurance companies.
The result shows that average return on assets is highest for SGIC (9.82 percent) and lowest for NB (-2.08 percent). The average return on equity is highest for SHICL (33.15 percent) and lowest for NB (-3.66 percent). The average firm age is highest for NALIC (22 years) and lowest for SICL, PMICL, GICL, SLICL and ALICL (4 years). The average firm size is highest for LIC (Rs.13300.06 million) and lowest for NB (Rs.231.26 million). The average premium growth is highest for PMICL (2631.40 percent) and lowest for UIC (1.32 percent). The average liquidity is highest for GICL (31.28 times) and lowest for NB (0.87 times). The average reinsurance dependence is highest for HGI (72.77 percent) and lowest for LIC (0.16 percent). The average underwriting risk is highest for NB (66.96 percent) and lowest for GICL (0.55 percent). The average growth of GDP is highest in year 2008/09 (6.1 percent) and lowest in year 2007/08 and 2011/12 (3.40 percent) respectively. The analysis of inflation shows that it is highest for the year 2009/10 (15.90 percent) and the inflation is lowest for year 2008/09 (5.60 percent).
The descriptive statistics for the Nepalese insurance companies reveals that the average ROA is 4.10 percent, average ROE is 10.04 percent, average underwriting risk is 32.60 percent, average reinsurance dependence is 23.46 percent, average age is 9.7 years, average size is 2608.67 million, average premium growth is 159.65 percent, average liquidity ratio is 2.81 times, average GDP growth rate is 4.44 percent and average inflation is 9.74 percent.
The correlation matrix shows that firm age, firm size, and premium growth, liquidity, underwriting risk, reinsurance dependence and gross domestic product are positively related to profitability whereas inflation is negatively related to the profitability of Nepalese insurance companies.
The regression analysis reveals that underwriting risk has positive impact on return on assets. This indicates that higher the underwriting risk, higher would be the return on assets. Similarly, reinsurance dependence and premium growth has positive and significant impact on return on assets. This shows that higher the reinsurance dependence and premium growth, higher would be the return on assets. In addition, firm age of the firm has positive impact on return on assets. It reveals that larger the firm age of operation, higher would be the return on assets. Moreover, firm size and liquidity have positive and impact on return on assets. It observes that higher the liquidity and total assets, higher would be the return on assets. Gross domestic product also has positive impact on the return on assets which indicates that higher the gross domestic product, higher would be the return on assets. However, inflation has negative impact on return on assets.
It also reveals that underwriting risk has positive impact on return on equity. This indicates that higher the underwriting risk, higher would be the return on equity. Similarly, reinsurance dependence and premium growth has positive and significant impact on return on equity. This shows that higher the reinsurance dependence and premium growth, higher would be the return on equity. In addition, firm age has positive impact on return on equity. It reveals that larger the firm age of operation, higher would be the return on equity. Moreover, firm size and liquidity have positive and impact on return on equity. It observes that higher the liquidity and total assets, higher would be the return on equity. Gross domestic product also has positive impact on the return on equity which indicates that higher the gross domestic product, higher would be the return on equity. However, inflation has negative impact on return on assets.
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