Evaluation of factors affecting financial performance of non-life insurance businesses in South Africa
Date
2022-04-12
Authors
Abdulraheem-Saheed, Hassana
Journal Title
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Abstract
Profitability enhancement through financial analysis remains a crucial tool in accessing the
performance of the insurance sector. In the developing countries such as South Africa, there is
dearth of information on the impact of explanatory factors on the financial performance of nonlife insurance businesses. This study examined the influence of selected firm-specific,
macroeconomic and underwriting profit variables on the financial performance of the South
African non-life insurance firms. Here, we considered 36 listed non-life insurers with measurable
markets over the period 2008 – 2019. The study employed return on asset (ROA) as a function of
financial performance as the dependent variables. While the firm size, leverage ratio, premium
growth rate, liquidity ratio and tangibility of assets constituted the investigated firm-specific
variables, the macroeconomic (income level, inflation rate, GDP growth rate, market structure and
trade openness), and underwriting profit (underwriting profit, total investment, shareholder’s fund
and earning asset ratio) were studied as independent variables using panel data regression
approach. The regression results revealed that except leverage and liquidity ratios, other firmspecific variables do not have statistically significant effect on the financial performance of south
African non-life insurance firms. On the other hand, only GDP rate and shareholder’s fund are the
exclusive macroeconomic and underwriting variables, respectively, with statistically significant
impact on the financial performance of the non-life insurance firms of South Africa. These results,
indeed, gainsay with economic theories. Thus, the leverage and liquidity ratios along with GDP
rate and shareholder’s fund can be identified as determinants of the financial performance of the
South African nonlife insurance sector. While providing some noteworthy insights on rational
decisions regarding selection of non-life insurance firms’ stocks and strategies that would guide
their operations, the data presented in this study will also be beneficial to regulatory authorities in
formulating sound and effective policies to ensure economic growth and stability of the republic
of South Africa.
Description
A research dissertation submitted in fulfillment of the requirements for the award of the Master of Accounting degree, Durban University of Technology, 2021.
Keywords
Financial performance, Non-life insurance businesses
Citation
DOI
https://doi.org/10.51415/10321/4320