Portfolio Allocation and Financial Performance of Insurance
Industry in Nigeria

EFUNTADE; Alani Olusegun; EFUNTADE; Olubunmi Omotayo

doi:https://www.doi.org/10.56201/ijefm.v7.no2.2022.pg41.61

📄 Download Paper

Portfolio Allocation and Financial Performance of Insurance Industry in Nigeria

EFUNTADE, Alani Olusegun, EFUNTADE, Olubunmi Omotayo

Abstract

This paper investigated the connection between portfolio allocation and financial performance of insurance industry in Nigeria. The data was obtained from secondary sources and estimated with autoregressive distributed lag (ARDL). The study discovered a long-run relationship between portfolio allocation to cash and equivalents, financial assets, reinsurance assets, investment properties, other receivables and prepayments, property and equipment and financial performance proxied by growth in gross premium income (GPI). Further research reveals that allocation to in cash and equivalents, other receivables and prepayments and properties and equipment had an insignificant negative effect on GPI. Furthermore, the study discovered that investment in financial assets, reinsurance assets and investment properties had positive statistically significant relationship with GPI. This result implies that insurance companies’ investment in financial assets, reinsurance assets, investment properties is relativ ely high and do have strong correlation with financial performance. Hence, portfolio management in insurance industry plays a crucial role in finance. Policy should be geared towards purchase of value- adding property and equipment, purchase of intangibles, efficient utilization of proceeds from sale of property and equipment and retention of cash and cash equivalents for prompt payment of claims

Keywords

Portfolio allocationfinancial performance and Nigerian insurance companies. JEL Classification: G22; G32

References

Abebe, A. K., & Abera, M. T., 2019. Determinants of financial performance: evidence from Ethiopia insurance companies. Journal of Accounting, Finance and Auditing Studies,5(1),155-172. Ahmed, R., & Sarkar, S. H., 2021.. Measurement of financial soundness of life insurance companies in Bangladesh: an empirical study. Business Review-A Journal of Business Administration Discipline, Khulna University,14(1),29-43. Almajali, M., & Shamsuddin, Z., 2019. The effect of capital structure on performance of insurance companies: Evidence from Jordan. International Journal of Accounting, Finance and Business (IJAFB),4(20),64-73. Batool, A., & Sahi, A., 2019. Determinants of financial performance of insurance companies of United States of America (USA) and United Kingdom (UK) during global financial crisis 2007-2016. International Journal of Accounting Research,1-9. Bhattarai, B. P., 2020. Factors Influencing Profitability of Insurance Companies in Nepal. International Journal of Management, 11(9),8-11. Birham, M., 2017. Determinants of Insurance Company Profitability in Ethiopia (Case study on Nile Insurance, Dire Dava Branch). International Journal of scientific and Research Publications,7(6),761-767. Calvo, C., Ivorra, C., & Liern, V., 2018. Controlling Risk through Diversification in Portfolio selection with Non-Historical Information. Journal of the Operational Research Society,69(10),1543-1548. Das, U., Davies, N., & Podpiera, R., 2003. Insurance and issues in financial soundness. IMF working paper No. 3/138,28. Derbali, A., & Jamel, L., 2018. Determinants of performance of Tunisia insurance companies: the case of life insurance. International Journal of Productivity and Quality Management,24(4),531-542. Deyganto, O. K., & Alemu, A. A., 2019. Factors Affecting Financial Performance of Insurance Companies Located in Hawassa City administration, Ethiopia. Universal Journal of Accounting and Finance,7(1),1-10. .European Financial Reporting advisory Group (EFRAG). Summary of US GAAP Requirements for Insurance (Including Charges to the accounting for Long-Duration Insurance contracts) and Comparison with IFRS 17-Issues Paper. EFRAG Board Webcast Meeting 17 March 2020 Paper 07-06,9-11. Fatihudin, D., & Mochlas, M., 2018. How Measuring Financial Performance. International Journal of Civil Engineering and Technology,10(1), 20-47. Iheanacho, E., 2018. Insurance industry performance and selected regulatory instruments in Nigeria, IOSR Journal of Economics and Finance(IOSR-JEF),9(6),67-77. Investopedia, 2021. A Brief Overview of the Insurance Sector. April 16, 2021. Corporate Finance & Accounting/Corporate Insurance. www.investopedia.com. Islam, N., & Akter, A., 2018. Factor Influencing the Insurance Companies’ Profitability in Bangladesh. Journal of Jessore University of science and Technology,3,58-62. Lester, A., 2019. On the Theory and Practice of Multifactor Portfolio. The Journal of Portfolio Management Quantitative,45(3),87-100. Li, J., Zhang, W., & Kong, E., 2018. Factor Models for Asset Returns based on Transformed Factors. Journal of Econometrics,207(2),432-448. Markowitz, H. (1952). Portfolio Selection. Journal of Finance,7,77-91. Mei, X., & Nogales, F. J., 2018. Portfolio Selection with Proportional Transaction Costs and Predictability. Journal of Banking & Finance,94(C),131-151. Mogro, S. C., & Barrezueta, N. B., 2019. Determinants of Profitability of Life and Non-life Insurance Companies: Evidence from Ecuador. International Journal of Emerging Markets,14,831-872. Morara, K., & Sibindi, A. B., 2021. Determinants of financial performance of insurance companies: Empirical evidence using Kenya data. Journal of Risk and Financial Management,14,566-579. Nairametrics, 2022. www.nairametrics.com, May 20,2022. National Insurance Commission (NAICOM), 2021. www.naicom.gov.ng. Pathirana, A. P. P. V., & Buddhika, H. J. R., 2021. Internal factors towards financial performance of life insurance companies in Sri Lanka. Sri Lankan Journal of Banking and Finance,4(2),41-61. Post, T., Karabati, S., & Arvanitis, S., 2018. Portfolio Optimization based on Stochastic Dominance and Empirical Likelihood. Journal of Econometrics,206(1)167-186. Rahman, S. U., 2018. Determinants of Profitability in Life and Non-life Insurance Sector of Pakistan: An Endogeneous and Exogeneous Evaluation. Journal of Independent Studies and Research Management and Social Sciences and Economics,16(2),97-105. Zhou, C., Wu, C., & Wang, Y., 2019. Dynamic Allocation with Time-Varying Jump Risk. Journal of Empirical Finance, 50,113-124

Portfolio Allocation and Financial Performance of Insurance Industry in Nigeria

Abstract

Keywords

References

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT