FINANCIAL PERFORMANCE EVALUATION OF LIFE INSURANCE COMPANIES OF NEPAL

Abstract

This study's goal is to assess the financial performance of Nepali life insurance firms and, using the CARAMEL framework, determine how certain parameters (ratios) affect that performance. The goal of the study is to determine if the performance of life insurance businesses is impacted by the factors that determine CARAMEL ratios. Both primary and secondary data were used in the research. The necessary information has been taken from the life insurance firms' annual reports and financial statements, which are accessible on their individual websites. A questionnaire is utilized as a key data gathering tool to ascertain the opinions of employed personnel about the viability of life insurance management. From 2012 to 2019, eight life insurance firms provided secondary data for this study. For main data, opinions from 120 respondents are gathered. Here, ROE and ROA are the dependent variables. The study's independent elements include the need for capital adequacy, the quality of the assets, actuarial and reinsurance, management effectiveness, earnings, and liquidity. The hypothesized association between performance and the CARAMEL ratios has been tested using a regression model. Quantitative data analysis has been conducted using both analytical and descriptive research methodologies. According to the data analysis, life insurance firms in Nepal own substantial assets in relation to their capital. While profits appear decent when compared to capital, they appear inadequate when compared to assets. The life insurance firms operating in Nepal have kept up a high level of liquidity to cover both policyholder and creditor claims. Life insurance firms in Nepal are well-managed and run effectively. Additionally, the examination of primary data shows that the management team is capable and have strong managing abilities. The performance or returns of the organization are directly impacted by the competency of the management team. Additionally, the number of insurance businesses has grown dramatically over the last several years, indicating that Nepal's insurance market is flourishing. Therefore, this study on assessing financial performance evaluation will help investors and policyholders compare and choose the best insurance provider. Keywords: ROA, ROE, Financial Performance, and CARAMEL Analysis