How do profitability indicators affect the capital returns of the Philippine domestic non-life insurers?

• Main Author: Mariano, Glenn leo D.
• Format: text
• Language: English
• Published: Animo Repository 2019
• Subjects: Insurance companies; Insurance—Finance
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/6384; https://animorepository.dlsu.edu.ph/context/etd_masteral/article/13437/viewcontent/HOW_DO_PROFITABILITY_INDICATORS_AFFECT_THE_CAPITAL_RETURNS_OF_THE_PHILIPPINE_DOMESTIC_NON_LIFE_INSURERS2_Redacted.pdf
• Institution: De La Salle University

One of the main driver of the country's economic activity is non-life insurance as it offers monetary protection to an individual or firm against financial losses suffered from unanticipated circumstances. The existence and survival of financially tough and steadfast non-life insurers is therefore indisputable. Therefore, in order to survive and maintain good financial stability, it is important to be profitable and recognize the indicators that generally influence the insurers’ profitability. In order to attain this objective, this study used quantitative research approach using Panel data covering five-year period from 2012–2016 for thirty-six domestic non-life insurance companies in the Philippines. The study uses regression model to see the effect of independent variables, which were the factors under study, on dependent variable profitability proxied by capital returns (ROE). Data was analyzed with Stata software. The findings of the study showed that Loss Ratio, Underwriting Risk and Debt to Equity Ratio have negative and statistically significant relationship with insurers’ profitability whereas Diversification, Financial Leverage and Input Cost have positive and statistically significant relationship with insurer's profitability. On the other hand, Insurance Risk Premium, Investment Income, Interest Earned on Surplus and Firm Size have statistically insignificant relationship with insurer's profitability. Among all variables which show a statistically significant relationship: Loss Ratio, Financial Leverage and Debt to Equity revealed to be the profitability indicators to have the highest influence on capital returns. Accordingly, non-life insurers and policy makers should give high concern to these factors to properly address profitability concerns.