Profitability Determinants of Insurance Companies in the Republic of Serbia

Abstract

The performance of insurance companies should be profoundly analysed in order to determine the growth possibilities of the insurance sector and its contribution to the development of the national economy. The aim of this paper is to investigate the influence of the firm-specific factors and external factors on profitability of insurance companies in the Republic of Serbia. In order to achieve this objective, multiple regression analysis is applied on the panel data covering the period from 2006 to 2016. The analysed sample consists of fourteen insurance companies that operate in the Republic of Serbia. As a measure of profitability, the Return on Asset (ROA) indicator is used. The results of the regression analysis indicate that a number of years operating on the market, capital adequacy, investment performance, market share and GDP growth rate are determinants that have statistically a significant impact on the profitability. These results should provide important information on what should insurance companies that operate in the Republic of Serbia and relevant policymakers focus in order to improve profitability, bearing in mind the fact that insurance sector can be an important determinant of financial and overall economic development of a country.