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Title: The determinants of the profitability of micro-life insurers in Nigeria and South Africa
Author: Oyekan, Olajumoke I. B.
Awarding Body: University of Bath
Current Institution: University of Bath
Date of Award: 2013
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This thesis examines the factors that influence the profitability of micro-life insurance firms in Nigeria and South Africa. In particular, the joint impact of cost efficiency, ownership structure, leverage and reinsurance together with other institutional factors, on the profitability of commercial micro-life insurance providers are investigated. The cost efficiency estimates are derived using two main frontier efficiency estimation techniques; data envelopment analysis (DEA) and stochastic frontier analysis (SFA) in a first-stage analysis. Furthermore, a panel data feasible generalised least squares (FGLS) estimator, which helps to simultaneously control for the presence of heteroskedasticity and serial correlation in the sample data, is employed to test the research hypotheses. Using the FGLS estimator in a panel of 61 firms over the period covering 2005 and 2010, the study supports as well as contradicts the results of prior studies. The present study finds that the economic insights derived using either DEA or SFA in the computation of cost efficiency, as well as its components - technical and allocative efficiency- are relatively similar. The empirical results further suggest that cost efficiency which is positively associated with profitability is significant for the business success of micro-life insurers. Furthermore, empirical evidence indicates that the increasing use of leverage helps to improve profitability, while the increasing use of reinsurance reduces profitability. Contrary to expectations, the interaction between reinsurance and leverage decreases the profitability of micro-life insurance firms. The empirical results reveal no statistically significant relation between ownership structure and the profitability of micro-life insurers for all the stock-ownership forms considered. On the other hand, the study finds that firm-specific effects such as the company size, product mix, length of time of operations in the market (age), and macro-economic factors such as the average annual interest rates, are significant drivers of the profitability of micro-life insurers. The present study contributes potentially valuable insights on the performance of micro-life insurance operations, and its conclusions could be of interest and relevance to local and multinational insurers and reinsurers, industry regulators and other interested parties such as multinational investors.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available