Factors Affecting Financial Performance of Life Insurance Sector in Pakistan

Abstract

The purpose of this research is to investigate the factors that affect the financial performance of life insurance sector in Pakistan. Possible internal and external factor that include Liquidity, net premium, premium growth, underwriting risk, debt to equity, insurance leverage, tangibility, equity capital, capital surplus, GDP, inflation and Market share were used to access their effect, whereas sector ROA was used to access performance. The data is gathered from 2008 to 2017 from 09 life insurance companies including 01 public life insurance company and 08 private life insurance company. In these observation there are also 02 solely conducted their business on takaful life insurance while other are only based conventional or both. Results were analyzed using panel regression.to panel ordinary least square regression model and generalized method of moment is used to estimate the results. The outcome of this study shows that tangibility, market share, net premium, insurance leverage and GDP is insignificantly or negatively related to the financial performance of Pakistani Life Insurance Company. The other independent variable such as liquidity, underwriting risk, debt to equity, equity capital, capital surplus and inflation are positively and significantly related to life insurance companies in Pakistan.This research will support the insurance industry to increase their premium collecting activates and actively take part in market by providing guideline and awareness of life insurance to its beneficiary. This will also increase the economic activity and also newcomers can also use this research as beneficial survey for capturing the market. This research is also handy for the shareholders and investors those who are interested in investing their money in life insurance sector or also for insure to find out soundness and solvency of their insurer.

Keywords: financial performance, life insurance companies, takaful insurance, conventional insurance, profitability, solvency