DETERMINANTS OF FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA

ABSTRACT

The financial performance of insurance companies is critical to their ability to fulfill policyholder obligations and drive the growth of the broader insurance industry. Understanding the key factors that impact insurance firm profitability and solvency is thus of importance. Thee study examines the determinants of financial performance of insurance companies operating in Nigeria. An ex- post facto research design is employed, utilizing panel data on 23 listed insurance firms over the period 2018-2022. Key financial performance metrics analyzed include return on assets (ROA), return on equity (ROE), and underwriting profit margin. Potential determinants investigated include firm total assets, investment, investment income, liquidity, operating efficiency, expenses, insurance claims, capital adequacy ratio. Multiple regression analysis is used to test the relationships between the dependent variables (financial performance metrics) and independent variables (determinant factors). The findings reveal that total assets, investments, investment income and gross premium have positive and significant impact on insurance companies profitability in Nigeria. Insurance expenses have negative and significant impact on insurance companies profitability in Nigeria. Claims, operational efficiency and liquidity have positive but none statistically significant effect on profitability of insurance companies in Nigeria. The results provide insights for managers, regulators, and investors regarding the key determinants of financial performance in the Nigerian insurance industry. The study recommends that managers of the Nigeria insurance companies should continue to emphasize efficient management of insurance risk assets and liabilities to maximize financial performance. The study contributes to the limited body of empirical research on determinants of insurance firm performance in the African context. The results offer practical implications for strategy formulation and policy development to foster a more robust and profitable insurance sector in Nigeria. Future research could explore additional performance determinants as well as potential non-linear and interactive effects.