Micro- and Macro-Level Factors Determining Financial Performance of UAE Insurance Companies

Abstract

The research aims to analyze the firm-specific and macroeconomic factors that affect insurance company's financial performance. The‎research explores the variables that influence the financial performance of the United Arab Emirates (UAE)’ insurance companies. The‎analysis for determining financial performance considers the following variables: the firm's age, retention ratio, capital adequacy, underwriting‎risk/loss ratio, financial-leverage, reinsurance dependency, and macro-economic factors such as GDP per capita, inflation rate considered‎as independent factors. The return-on-asset (ROA) is the key measuring indicator; it is regarded as the dependent variable for financial‎performance measures. The research focuses on secondary information obtained from insurance companies’ financial statements. The‎researcher targeted 18 insurance companies listed on the UAE stock exchanges for study purposes. The research examines the overall factors‎that influence the financial performance of an insurance company. For analysis of data, software package of social sciences (SPSS version 20)‎is used. The studies used correlation and multiple linear regression analysis to determine financial performance and their effects. The analysis‎suggests that there are important and constructive relationships between the size, capital adequacy, and reinsurance dependency, while loss‎ratio, retention ratio, and financial leverage indicate a major negative relationship. And there's no link between GDP per capita and inflation.