Analyzing firm-specific factors affecting the financial performance of insurance companies in South Africa

  • Received December 2, 2022;
    Accepted February 16, 2023;
    Published April 5, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/ins.14(1).2023.02
  • Article Info
    Volume 14 2023, Issue #1, pp. 8-21
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This study aims to investigate the effect that firm-specific factors have on the financial performance of South African insurance companies. This paper looked at the performance of 36 insurers that are publicly traded and have quantifiable markets from 2008 to 2019. The return on assets (ROA) was calculated as a function of the financial performance in this study. While the firm size, leverage ratio, premium growth rate, liquidity ratio, and tangibility of assets were examined as dependent factors using the panel data regression technique, the premium growth rate, liquidity ratio, and tangibility of assets were explored as independent variables. According to the findings of the regression analysis, other firm-specific factors, with the exception of leverage and liquidity ratios, do not have a statistically significant influence on the financial performance of South African insurance companies. A negative and insignificant association was discovered between premium growth rate and ROA at –0.0023 and tangibility of assets and ROA at –0.0113. There was a strong positive and significant relationship between liquidity ratio and ROA at 0.0927, while the size had a positive but insignificant relationship with ROA at 0.0039. Leverage ratio and ROA had a negative but significant relationship at –0.1512. This study suggests that the use of automated systems and insured techs will be advantageous in cutting costs associated with policyholder enrollment, claims agreement, and even easily achieved tailor-made policy initiatives.

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    • Figure 1. Insurance Penetration: Premiums as Percent of GDP, 2018 (in percent)
    • Table 1. Variables’ description
    • Table 2. Variables’ descriptive statistics
    • Table 3. Results of Pearson’s correlation
    • Table 4. Panel result
    • Data curation
      Thabiso Sthembiso Msomi
    • Formal Analysis
      Thabiso Sthembiso Msomi
    • Methodology
      Thabiso Sthembiso Msomi
    • Software
      Thabiso Sthembiso Msomi
    • Supervision
      Thabiso Sthembiso Msomi
    • Writing – original draft
      Thabiso Sthembiso Msomi
    • Writing – review & editing
      Thabiso Sthembiso Msomi, Smangele Nzama
    • Conceptualization
      Smangele Nzama
    • Investigation
      Smangele Nzama
    • Validation
      Smangele Nzama