A Study on Impact of Investment Income and Inflation to Profitability of Insurance Industry inSri LankanComposite Insurance Companies
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Date
2012
Journal Title
Journal ISSN
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Publisher
Uva Wellassa University of Sri Lanka
Abstract
Insurance Industry has become one of the booming industries in Sri Lanka since 2003 when the Insurance Board of Sri Lanka was established. Profitability of Insurance Companies basically contain two components namely underwriting profit and Investment Income. Generally, Insurance Companies manage their profits with Investment Income. According to World Insurance Report 2011, insurance companies around the globe are re-focusing on their core operations. Some lost investment income during the crisis; others face changing customer preferences; most must tackle a newly stringent regulatory environment.
Hence, the above question is significant when the inflation materially affects the country's economic activities. Further, there is a negative relationship between Investment Income and Inflation (D'Arcy, 1981). Accordingly, inflation can be a significant factor to the Insurance companies' profitability.
Methodology
According to the objectives of the research it requires secondary data from Composite Insurance companies in Sri Lanka. To extract Composite Insurance companies, researcher used Stratified Sampling Technique and Company Annual Reports for Secondary Data Collection.
Data was analyzed according to the research objectives and Net Combined Ratio was used to identify the Insurance Companies which face problem of making profits without Investment Income.
Net Combined Ratio (Formula) = Net Claims Incurred + Other Expenses
Net Earned Premium
To identify the relationships of each Inflation and Investment Income and Investment and Profitability, a simple regression was used and the correlation was measured by using MINITAB Statistical software.
Description
Keywords
Entrepreneurship and Manangment, Business studies, Managment, Human Rights Education