Leveraging firm-specific characteristics on the profitability of quoted non-life insurers in Nigeria

Abstract

Profitability of insurance companies is sensitive either positively or negatively to various internal and external factors requiring delicate balancing between focusing on either underwriting or investment practices. Findings on profitability trends are therefore inconsistent across different jurisdictions. This has overtime been studied across geopolitical spaces showing varied outcomes due to employment of different methods and focus on firm specifics. It becomes even more crucial in Nigeria whose insurance penetration is very low to understand the drivers of profitability. This study aimed at assessing how firm-specific characteristics influence profitability in the non-life sector in Nigeria. A panel research design was run on 15 quoted non-life insurance companies for 15 year for the period 2008 -2022. Census techniques were employed adjusted by data availability.  Reasonable evidences were found to support that FS negatively significant while FL and LIQ were positively significant to profitability at p<0.05. FL stands out at huge coefficient of 67.57% throwing light on adequate provisions for reserves which may have been ploughed into investment to produce profitability. This emphasizes that sound reserving strategy and liquidity management is sine qua non to the fortunes of non-life insurance sector in Nigeria. Regulators should consider risk-based supervision to monitor liquidity, reserving, premium growth rate and claims management in view of their insignificant outcomes of the proxies (loss ratio, retention rate and premium growth rate).