Asset Quality and Operational Efficiency of Non-Life Insurance Companies Listed in Nigeria

• Tyavbee J. Wula

• Ogechi Ewuru

This study assessed the effect of asset quality on the operational efficiency of 11 non-life insurance companies listed in Nigeria from 2010 to 2024. The real estate-to-total-assets ratio, investment in unquoted equities-to-total-assets ratio, and accounts receivable-to-total-assets ratio proxied asset quality, while the expense ratio proxied operational efficiency. Panel data obtained from the annual reports and accounts of the studied companies were analyzed using random-effects regression. The findings revealed that real estate to total assets ratio has a positive and significant effect on expense ratio, implying that excessive investment in real estate increased operational costs and reduced operational efficiency; investment in unquoted equities to total assets ratio has a positive but insignificant effect on expense ratio, while accounts receivable to total assets ratio has a negative and insignificant effect on expense ratio. However, the Wald chi-square showed that the joint effect of the independent variables on the dependent variable is significant. The study concluded that asset quality significantly influenced the operational efficiency of listed non-life insurance companies in Nigeria during the study period, with real estate investment emerging as the major determinant of expense ratio. The study, therefore, recommended that insurance companies should adopt prudent asset allocation strategies, avoid excessive concentration in real estate investments, strengthen investment monitoring systems, and improve receivables management practices in order to enhance operational efficiency and sustain financial soundness.

• PDF