Examining the Nexus between Internal Factors and Profitability of Insurance Companies Listed at Kuwait Stock Exchange

Abstract

Insurance is a form of risk management where it is used to transfer risk from one entity to another for a premium to hedge against any risk of unexpected loss. As a result, the insurance sector is becoming an important part of the financial sector in the world, and Kuwait is no exception. The aim of this study is to investigate the internal factors that mostly affect the profitability of insurance companies listed at the Kuwait stock exchange for the period spanning from 2010 to 2017. The study examines the effect of leverage, liquidity, tangibility, growth, management efficiency, and the size of the company on the most commonly used parameter of measuring the profitability of any company and that is the return on assets (ROA). A panel data collected from the financial statements of the seven companies listed at the stock market were used to examine the effect of the factors on the profitability of these companies. Using ordinary least squares (OLS) regression method, the results showed a statistically significant inverse relation between leverage and the age of the company with profitability while there was a statistically significant direct relation with tangibility and the size of the company. The results also showed that liquidity, growth, and management efficiency did not have a significant effect on the profitability of the insurance companies in Kuwait.