FACTORS AFFECTING RISK AND RETURN OF LIFE INSURANCE COMPANY IN NEPAL

Abstract

This study provides a thorough analysis of the risk and return dynamics within Nepal's expanding life insurance sector over a 16-year period, from fiscal year 2007/08 to 2022/23. Utilizing a combination of descriptive and analytical research methodologies, the research carefully examines key metrics such as market price per share (MPS), dividend per share (DPS), and holding period returns (HPR) for six prominent insurance companies listed on the Nepal Stock Exchange (NEPSE). The research reveals significant variations in market prices per share among the selected insurance firms throughout the period studied. These fluctuations in market valuation offer insights into the companies' performance trends, market sentiment, and underlying financial dynamics. Some companies demonstrated consistent growth, reflecting strong market perception and internal performance stability. In contrast, others experienced erratic fluctuations, indicating market volatility and potential internal strategic shifts or challenges. The analysis of dividend per share distributions sheds light on the dividend policies and shareholder return strategies adopted by the insurance companies. The study identifies a range of dividend distribution patterns, from steady and consistent payouts to sporadic or non-existent dividend periods. These variations highlight the differing approaches and priorities of insurance companies in allocating earnings and rewarding shareholders, reflecting broader strategic considerations and financial management practices. Additionally, the examination of holding period returns (HPR) provides a nuanced understanding of the risk-return profiles of the insurance companies. By evaluating average returns and volatility metrics, such as standard deviation and coefficient of variation, the study outlines the relative risk levels associated with each company's investment proposition. The study's implications extend beyond academic discourse to practical applications for various stakeholders within the insurance sector. Investors can use the insights to optimize their investment portfolios, policymakers can use the findings to inform regulatory frameworks, and insurance companies can refine their strategic approaches based on benchmarking and industry trends