LIQUIDITY AND PROFITABILITY OF LIFE INSURANCE COMPANIES IN NEPAL

Abstract

In this study, the link between life insurance company's liquidity and profitability during the years 2013/2014 to 2022/23 is examined. The research covers five of the fourteen life insurance companies that are listed on the Nepal insurance board. The research employed secondary data. Data and information were gathered from the Nepal insurance board and selected life insurance companies annual reports. The study's conclusions were supported by financial instruments, multiple regression analysis, correlation analysis, and descriptive statistical analysis. ROA and ROE were used to gauge profitability, whereas current ratio, quick ratio and cash ratio were used to measure liquidity. The statistical program for social science SPSS software, version 25, was used to conduct the analysis. Based on the findings Nepal life insurance companies have an excessive amount of money but no stability. The current ratio, quick ratio and return on assets have a negative connection which shows that a rise in the liquidity ratio will result in an decrease in the return on assets. The association between cash and return on assets is also positive and substantial indicating that as cash increases, return on assets also increases. The liquidity ratios are insignificantly correlated with return on assets. There is a negative association between the current ratio and cash ratio with return on equity however it is insignificant at 0.05 levels. The quick ratio and return on equity have a positive association, indicating that a higher liquidity ratio decreases return on equity and it is significant at 0.05 levels. Return on equity is only marginally impacted by changes in liquidity. Cash Ratio and return on equity are positively correlated and significantly correlated.