engleski

Determinants of Insurance Companies' Profitability In Croatia

The aim of this paper is to investigate the determinants of the insurance companies’ performance in the Republic of Croatia during the period from 2003 to 2009. Although performance of other financial institutions i.e. banks are widely investigated, the empirical framework that at the same time analyzes the effect of insurance-specific, industry-specific and macroeconomic determinants on the insurance profitability are not so exhaustively analyzed. This is especially true for the Croatian insurance industry. So, the purpose of this paper is to fill this gap by performing (to the best of authors’ knowledge) the first such research for the Croatian non-life insurance market. Furthermore, this analysis also contribute to the field of empirical performance researches in a way that it provides additional insight into the impact of different variables such as: past profitability, size, ownership, expense ratio, industry concentration, market growth and inflation ; on the insurance companies’ performance in a developing country. The model was estimated by using the GMM estimator and the findings indicate negative and significant influence of expense ratio and inflation on profitability ; and significant positive influence of past performance on current profitability. Additionally, results reveal higher level of profitability of domestically owned firms than of foreign owned.

Determinants; profitability; insurance; Croatia

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