Matthys Johannes Swanepoel

This study aimed to determine the effect of operational efficiency on financial health of non-life insurance companies in South Africa. Operational efficiency refers to an insurer’s ability to deliver its services while minimizing costs and maximizing profitability. A descriptive research design was used to achieve the objective of this study. The panel data from 2008–2019 used secondary data sourced from S&P Capital Q and Refinitiv Eikon, well-known databases with readily available data. The population of this study focuses on 32 non-life insurance companies with measurable markets of 57 domestic non-life insurance providers in South Africa. Data were analyzed using Fixed-effect regression, (Random-effect GLS regression, correlation, and the Hausman test. The result reveals that of all the variables, only premium growth correlates significantly (negative correlation) with financial health. This could be a result of a specific investment that resulted in a lower rate than that of a risk-free security. It is also important to note that a negative premium does not always indicate a problem. This can happen due to cancellations of reinsurance, reinsurer closures, paid off reinsurance ahead of time, under- pricing policies, inadequate reserves, high claim frequency, operational inefficiencies, investment losses, inadequate risk assessment, economic downturn, regulatory changes, catastrophic event, and any other events. It is essential for non-life insurance companies to carefully manage their underwriting practices, risk assessment, pricing strategies, and investment portfolios to avoid negative premium situations and maintain financial health.

The South African non-life insurance sector faces persistent challenges, including low investment returns, the need for digital transformation, and underperformance in meeting strategic goals. These issues threaten operational efficiency and financial health, critical factors for resilience in a competitive market. This study investigates the relationship between operational efficiency, financial health, and resilience in 32 South African non-life insurance companies. A descriptive research design was employed, analyzing panel data from 2008 to 2019, a period chosen due to the financial crisis of 2008, which significantly impacted the insurance industry. Data were sourced from S&P Capital IQ and Refinitiv Eikon, known for providing reliable financial information. Regression analysis was used to examine how liquidity, leverage, and company size influence financial health, with company size analyzed as a moderating factor.
The results showed that liquidity and leverage positively impact financial health, with larger companies benefiting more from operational efficiency and profitability improvements. However, the effect of liquidity decreases as company size increases. The model demonstrated strong explanatory power (R² = 0.8662) and was statistically significant (Wald Chi² = 611.92, p < 0.01). These findings offer actionable insights for industry stakeholders and policymakers, emphasizing the importance of tailored strategies to enhance resilience and sustainable growth across companies of varying sizes. Addressing operational inefficiencies and financial health can strengthen the industry’s capacity to navigate future challenges.