Company-Specific Correlates of Corporate Profitability : Evidence from Quoted Insurance Companies in Nigeria

This study examined the determination of insurance profitability in Nigeria, employing the causality, co-integration, error correction modeling and impulse response analytical techniques against pooled data from 19 insurance companies listed on the Nigeria Stock Exchange for 10 years (2006-2015). The results showed that the variables have long-run equilibrium relationship, being co-integrated, and possible errors in the short-run correct with a speed of 8.89% per annum. It was also indicated that significant long-run joint-causality flowed from the identified correlates to profitability. Strengthening the above point is the revelation that innovations or shocks to the identified variables produced varying effects on profitability. More particularly, in the short-run, significant causality flowed from size, risk (defined in terms of loss or claims\ratio), and growth in written premiums to profitability. These variables were found to causally and significantly relate with profitability. By implication, size, risk, and growth constitute the major determinants of insurance profitability in Nigeria. In contrast, there is no significant causality found flowing from liquidity, leverage, and tangibility to insurance profitability in Nigeria, in the short-run. Thus, they are not revealed to be the major determinants of profitability for the insurance companies studied, in view of their causal inferiority. The implicated recommendation is along the lines of improved premium generation machinery, improved claims' settlements, and increased use of intangible assets.