IMPACT OF PREMIUM AND INVESTMENT ON PROFITABILITY OF LIFE INSURANCE COMPANIES IN NEPAL: With Reference to Asian Life Insurance Company Limited, Citizen Life Insurance Company Limited and Reliable Nepal Life Insurance Company Limited

Abstract

This study analyzes the impact of premium and investment on profitability of life insurance companies in Nepal. Secondary data was gathered from three samples using convenience sampling of life insurances for six years periods (2017/18-2022/23). This study has taken descriptive and causal relationship research design to analyze the impact of premium and investment on profitability of life insurance; and has employed descriptive analysis, correlation analysis and multiple regression analysis. It shows that Nepalese insurance companies have increased both premium collection and total investment and stable profitability with high premium collection on endowment, high investment in fixed deposit in recent years. The correlation analysis examined that the net profit margin (NPM) has significant negative relation with premium on endowment (EP), positive relationship with premium on anticipated endowment (AEP), premium on endowment cum whole life (ECWLP) and investment in fixed deposit (FD) and negative relationship with investment in debentures (DEB) and investment in equity instruments (EQI). Return on assets (ROA) has significant negative correlation with EP and EQI, positive correlation with AEP, ECWLP, FD and DEB. Return on equity (ROE) has significant positive correlation with AEP, positive correlation with EP, DEB and EQI and negative correlation with ECWLP and FD. Return on investment (ROI) has significant negative correlation with EP and EQI, positive correlation with AEP, ECWLP, FD and DEB. The multiple regression analysis reveals a negative impact of EP on NPM, but positive impacts of AEP, ECWLP, FD, DEB, and EQI on NPM. Similarly, EP negatively affects ROA, while AEP, ECWLP, FD, DEB, and EQI positively influence ROA. However, EP and ECWLP negatively impact ROE, whereas AEP, FD, DEB, and EQI positively affect ROE. In contrast, EP negatively affects ROI, while AEP, ECWLP, FD, DEB, and EQI positively impact ROI. Key Words: Impact, Premium policies, Investment sectors, Profitability, Life insurance