Underwriting Capacity and Financial Performance on Non-Life Insurance Companies in Nigeria (original) (raw)
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Insurance firms assume different types of business-specific risks that affect financial operations. The study therefore investigates the effect of these insurance specific risks on profitability in Nigeria over the 10-year period (2009-2018) with a sample size of 19 firms. Three variables, such as Re-insurance, Technical Provisions and Underwriting Risks, have been used as a measure of insurance specific risk for independent variables. The net profit margin was used as a measure of profitability for the dependent variable. The study is based on the Ex-Post Facto Research Design, which uses data already collected for the study. The study used secondary data from their annual reports. The results of the fixed effect regression model showed that the technical provision and the underwriting ricks had a negative and significant impact on profitability, while the re-insurance risk had a negative and insignificant impact on profitability. The study concludes that an increase in technical provision and risk underwriting will lead to a poor profitability of the insurance companies listed in Nigeria. The study recommends that insurance companies in Nigeria should make sufficient provision for outstanding claims by conducting an adequate assessment of their liabilities and also taking into account past experience to develop a comprehensive procedure for effectively monitoring and controlling their outstanding claims.
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Predictors of Profitability in the Nigerian Insurance Industry
CERN European Organization for Nuclear Research - Zenodo, 2022
This study examined the predictors of profitability in Nigeria Insurance Industry between 2011 and 2020. It looked into the effect of financial leverage, solvency margin, financial liquidity and risk underwriting on Profitability of insurance industry in Nigeria. In the study, descriptive research design was employed with the population of thirteen (N=13) composite insurers from which a sample of six (n=6) were randomly selected. Four hypotheses were tested using e-view. Findings showed that SOVEREIGN TRUST plc has the highest ROE with mean value of 0.058489 followed by LEADWAY Insurance Plc with 0.043822 mean value on ROE. Mutual Benefit plc covers 0.038811 and PRESTIGE insurance has ROE of 0.028478. LASACO Assurance Plc with 0.025744 while Cornerstone plc has the lowest mean value on ROE: 0.0112 in the distribution. Thus it is evident that SOVEREIGN TRUST plc and LEADWAY Insurance Plc are the leaders in the Nigerian Insurance industry for the period, with positive effect of financial leverage, solvency margin, financial liquidity and risk underwriting on profitability of the insurance companies in Nigeria. The study therefore concluded that there is statistically significant relationship between the four independent variables (financial liquidity, solvency margin, risk underwriting and financial leverage) on the dependent variable , profitability, proxied by return on equity of insurance companies in Nigeria. The study recommended that stakeholders in the Nigerian insurance industry in collaboration with their regulatory body; National Insurance Commission (NAICOM), should maximize the contributions of the various predictors of profitability in the composite insurance industry across the nation.
Financial Risk and Financial Performance of listed Insurance Companies in Nigeria
European Journal of Business and Management, 2020
Financial risk if not properly taking care of in a business might lead to its collapse especially, insurance companies whose core business deals with day to day handling of risk, in light of this, the study examined the effect of financial risk on financial performance of listed insurance companies in Nigeria from 2009 to 2018. Population of the study consist of 27 listed insurance companies and a sample size of (19) firms. The study used secondary data obtained from annual report of the firms and Correlational design was used. Financial performance which is the dependent variable measured by return on asset (ROA) while independent variable are credit, liquidity and solvency risks. The results from the fixed effect regression proved that credit risk has negative and significant effect on financial performance, Liquidity risk has negative and insignificant effect on ROA and solvency risk has positive and significant effect on ROA. The study concludes that credit risk has adverse influence on ROA of listed insurance companies in Nigeria. The report advises that Nigerian insurance providers should do better to adequately control their receivable number by supplying their debtors with payment plans that are appropriate for servicing their outstanding debt or loan.
European Scientific Journal, ESJ, 2017
The purpose of the study was to establish the intervening effect of underwriting risk (loss ratio) on the relationship between actuarial risk management practices (ARMP) and performance of property and casualty (P & C) insurance underwriters in East Africa. Findings from primary and secondary data gathered from 82 general insurers from Kenya, Uganda and Tanzania show that there is a significant positive relationship between ARMP and non-financial performance and that loss ratio significantly mediates this relationship. The relationship with financial performance was however insignificant. The implication is that P & C insurance firms should keenly watch their loss ratios in order to improve their non-financial performance by correctly underwriting, pricing and reinsuring their risks in order to influence their claims ratio and also have a strategic claims management program in place that controls costs and leads to better firm reputation, which in turn will have ripple effect in inc...
STUDIES AND SCIENTIFIC RESEARCHES. ECONOMICS EDITION, 2018
Reinsurance is used by primary insurers as a device to cushion the effect of underwriting and solvency risks. However, an overdependence on reinsurance could cause depletion in the income of the primary insurer. The study examined the effect of reinsurance on the financial performance of non-life insurers in Nigeria. Secondary data used for this research were analysed with descriptive statistics, coefficient of determination (R 2), and linear regression. Results showed a significant positive relationship between reinsurance utilisation and premium growth rate. Similarly, a significant positive relationship was found between reinsurance dependence and profitability (loss ratio). It was recommended that non-life insurers should embrace more of reinsurance facilities particularly for risks of high loss potentials in order to stabilise premium growth rate. In addition, Insurance firms in Nigeria should harness their claims management activities in order to minimise cost and exposure to underwriting risks.