Effect of Underwriting Capacity on Profitability of Insurance Companies in Nigeria
This study examined the effect of underwriting capacity on the profitability of insurance companies in Nigeria. The analysis utilized secondary annual data spanning 23 years from 2000 to 2023, which were sourced from the Central Bank of Nigeria (CBN) and the NAICOM Statistical Bulletin. The study employed the Augmented Dickey Fuller unit root test and the Autoregressive Distributed Lag model using E Views to estimate the impact of the independent variables, insurance underwriting reserves and insurance underwriting shareholders’ funds, on the dependent variable, profitability of insurance companies, proxied by net profit margin. The results indicated that insurance underwriting reserves had a significant and positive effect on net profit margin, while insurance underwriting shareholders’ funds also exerted a significant positive influence. Overall, the findings revealed that underwriting capacity significantly enhanced the profitability of insurance companies in Nigeria over the period of study. Based on these findings, the study recommended that insurance regulators collaborate with industry stakeholders to promote effective investment of insurance funds, and that insurance companies strengthened corporate governance and operational efficiency in underwriting activities to boost public confidence and financial performance.
Keywords: Underwriting capacity, Insurance underwriting reserves, Shareholders funds, Profitability, Net profit margin, Nigerian insurance industry
