LIQUIDITY MANAGEMENT AND FINANCIAL PERFORMANCE OF LISTED INSURANCE COMPANIES IN NIGERIA

ABSTRACT

Numerous individuals think the chance of an insurance company running into challenges over liquidity issues is a remote possibility. After all there is no utilizing of credits similarly as with banks. Be that as it may, this isn’t the situation and poor liquidity management has been a source of some historic insolvencies. This study assesses the effect of liquidity management on financial performance of listed insurance companies in Nigeria. The listed insurance firms are fifty-eight (58) in numbers out of which a sample of ten (10) were used for the study. Liquidity management as the independent variable while current ratio, Liquidity Buffer, Risk monitoring and reporting and Acid test ratio as it’s sub-variables. Financial Performance as the dependent variable while revenue per policyholder, Average cost per claim, return on surplus and policy sales growth are its subvariables. The study is trying to solve the problem listed insurance companies face with liquidity and how it might affect their financial performance. The scope of the study is limited to insurance companies that are listed on the Nigerian stock market. The study used secondary data collected from the annual reports of the listed insurance companies. Both the descriptive and inferential statistics were employed in this study. Regression analysis was employed in examining the impact of liquidity management on financial performance variables. Regression result showed that there is a significant impact of liquidity management on revenue per policyholder and that 39.9% variation on revenue per policyholder can be attributed to liquidity management. There is a significant impact of liquidity management on average cost per claim and 48.07% variation on average cost per claim can be attributed to liquidity management. Furthermore, there is a significant impact of liquidity management on return on surplus and that 52.22% variation on return on surplus can be attributed to liquidity management. Finally, there is a significant impact of liquidity management on policy sales growth and that 57.04% variation on policy sales growth can be attributed to liquidity management.