Impact of Income Structure to Profitability: Empirical Evidence from Life Insurance Industry in Nepal

Abstract

Purpose: This paper has two objectives: first it explores the income structure and their trend. Second, it aims to confirm whether the income structure and financial performance have any significant difference on younger and older firms.Methodology: This paper obtained data from the financial statements of eight life insurance companies for five years period (2007/08 to 2011/12). Seven parameters of sources of income and four parameters of profitability and earnings analyses and arrives into conclusion using descriptive statistics, Pearson's correlation and t test along with descriptive statistics.Findings: This study concludes that age of firm influence the income structure but it is indifferent in profitability and earnings. Similarly types of income sources and Net Profit Margin and Return on Asset have negative but Return on Equity have positive correlation.Implication: The main implication of this study is that it contributes additionally to understand the income structure of the life insurance companies and their relationship with profitability in general and to explore differences on financial performances between younger and older firms in particular.