Effect of Liquidity Risk, Premium Growth on the Performance of Quoted Insurance Firms in Nigeria: A Panel Data Analysis

Abstract

This study assesses the effect of liquidity risk on firm performance of listed insurance companies in Nigeria for the period of 2011-2015. The listed insurance firms are twenty Five (25) in numbers out of which a sample of twelve (12) were used for the study. Liquidity risk as the independent variable was proxy with leverage, claim loss ratio and premium growth, while the return on asset was used to proxy firm performance. The study adopts a panel multiple regression techniques and data were collected from secondary source through the annual reports of the firms after controlling for fixed/random effects.The findings of random effect reveal that leverage has significant negative effect on return on assets. The claim loss ratio has insignificant negative influence on return on assets while premium growth has positive and insignificant effect on firm performance of listed insurance companies in Nigeria. It is recommended among others that the managers, shareholders and other stake holders to checkmate and control liquidity risk as it have been found empirically to enhance the quality of the firm’s financial performance.

The Effect of Growth of Net Premium, Claim Ratio, RBC, and Retention Ratio on the Financial Performance of Insurance Companies in the ASEAN Region

“…The results of this research analysis are in line with previous studies, which show that net premium growth positively affects financial performance because premium growth which tends to be high, can improve the financial performance of insurance companies in Indonesia (Markonah et al, 2019). Other research shows that net premium growth affects financial performance because net premium growth has a positive relationship with return on company assets (Olalekan, 2018). Other research also shows the results that net premium growth influences financial performance.…”

“…This shows the company's success rate in managing the risks received from the insured (Kirmizi & Agus, 2011). The same thing is stated by research (Isseveroglu, 2015;Markonah et al, 2019;Olalekan, 2018) which states that the greater the growth in net premiums, the better the financial performance of insurance companies will be. H1: Net premium growth has a positive effect on the financial performance of insurance companies…”

“…This is because higher premium growth will improve the financial performance of insurance companies in Indonesia (Markonah et al, 2019). Net premium growth affects financial performance because premium growth has a positive relationship with return on assets and was found not statistically significant (Olalekan, 2018). Net premium growth affects financial performance, which means that net premium growth with the TOPSIS method can assess a company's financial performance (Isseveroglu, 2015).…”

“…Other research states that higher premium growth will improve the financial performance of insurance entities in Indonesia. This means that net premium growth affects financial performance (Isseveroglu, 2015;Markonah et al, 2019;Olalekan, 2018).…”

Financial Risk and Financial Performance of listed Insurance Companies in Nigeria

“…The seven years chosen for this study is not enough to give a generalize findings of the study and if they could have used ten years the result might have been better than that. Olalekan (2018) examined Liquidity Risk and listed insurance companies financial Performance in Nigeria: using A Panel Data Analysis for the period of 2011-2015. For this purpose, the population of the study is 25 listed insurance firms and the sample of twelve ( 12) were used for the study.…”