Analyzing the Profitability and Efficiency in European Non-Life Insurance Industry

Jarraya, Bilel; Afi, Hatem; Omri, Anis

doi:10.1007/s11009-023-10043-0

Cited by 2 publications

(1 citation statement)

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“…That means focusing on business profits, which are measured through financial ratios. So, Jarraya et al (2023) study the efficiency scores of production factors for 250 European non-life insurance companies and relate this with profit. One would expect efficiency in management and financial profitability to be positively correlated since it is probable for companies to mishandle their resources to be inadequately managed and to perform inefficiently, thus obtaining poor outcomes and weak financial ratios.…”

Section: Introductionmentioning

confidence: 99%

Studying the relation between efficiency and profitability in the non-life insurance market

Sara Suárez Fernández,

Quiroga-Garcia,

Manzano Pérez

2024

RMCE

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Previous literature on business performance in the insurance market tends to focus only on efficiency or profitability. However, the relationship between both has yet to be addressed in the Spanish insurance market. This paper examines the relationship between efficiency scores obtained through a two-stage DEA and the values of the classical financial ratios (ROE, ROA, Technical Ratio, Combined Ratio and Loss Ratio). We use a sample of 111 firms from the non-life Spanish insurance market from 2008-2017. We find a positive relationship between efficiency and profitability, which shows decreasing returns, with the positive effect of efficiency on profit ratios being lower for the most efficient companies.

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Section: Introductionmentioning

confidence: 99%