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Factors Affecting the Financial Performance of Insurance industry in the GCC region.
Alkanawi, Renad
Alkanawi, Renad
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Abstract
he research explores the factors affecting the financial performance of insurance companies within the Gulf Cooperation Council (GCC) region while employing a comprehensive dataset spanning 23 years (2000-2023) from 29 selected companies. Focusing on leverage, liquidity, investment, and loss ratios. We conducted detailed statistical analyses, including descriptive statistics, correlation analysis, unit root test, and regression modeling, to examine the relationship between these financial metrics and insurance companies' profitability, as measured by Return on Assets (ROA) and Return on Equity (ROE). Our findings reveal that liquidity significantly enhances financial performance, indicating that companies with higher liquidity ratios tend to exhibit better financial health. Conversely, elevated loss ratios negatively affect profitability, underscoring the importance of effective risk management and claims processing. Surprisingly, leverage does not show a significant impact on financial performance, challenging conventional beliefs about the positive effects of debt on profitability. The study also considers the influence of company size, age, solvency, and macroeconomic factors such as GDP growth rate and inflation. offering a nuanced understanding of the determinants of financial success in the insurance industry. This research contributes valuable insights into the strategic financial management of insurance companies, highlighting the critical role of liquidity and loss ratios in driving financial performance while reevaluating the significance of leverage within the sector. Keywords: Financial Ratios, Insurance companies, financial performance, risk management, Profitability, Return on Asset, Return on Equity, Leverage, Liquidity, Size, GDP, Age, Investment, Solvency, Inflation, and GDP.