ASSESSMENT OF DETERMINANTS OF PROFITABILITYOF NEPALESE LIFE INSURANCE COMPANIES

Abstract

The main purpose of the study is to examine the determinants of profitability of Nepalese insurance companies. This study is based on both descriptive and casual comparative research design and this study is based on secondary data. All 17 life insurance companies constitute the population and among of them, Asian Life Insurance Company, Gurans Life Insurance Company Limited, National Life Insurance Company Limited, Prime Life Insurance Company Limited and Nepal Life Insurance Company limited are selected as the sample for the study of determinants of profitability. In this study random sampling was used to find out the result. Correlation coefficients matrix of the Nepalese life insurance companies shows that premium growth has a negative relationship with return on assets. Similarly, firm age has a negative relationship with return on assets. The result also shows that solvency has a negative relationship with return on assets. However, the result also reveals that liquidity ratio has a negative relationship with return on assets. Likewise, book value per share also has negative relationship with return on assets. Furthermore, firm size also has negative relationship with return on assets. The result also shows that premium growth has a negative relationship with return on equity. Similarly, firm age has a positive relationship with return on equity. The result also shows that solvency has a positive relationship with return on equity. However, the result also reveals that liquidity ratio has a positive relationship with return on equity. Likewise, book value per share also has positive relationship with return on equity. Furthermore, firm size also has positive relationship with return on equity. The result in this study therefore, suggested decreasing excess premium growth rate, increasing solvency ratio, reducing the excess liquidity ratio, increasing assets size and increasing book value to increase ROA and ROE of insurance companies in Nepal. Keywords: Return on assets, Return of equity, premium growth ratio, solvency ratio, liquidity ratio, assets size, book value