The Effects of Recognizing and Measuring of Investment Properties on The Financial Position and Performance: Evidence From Insurance Companies in Croatia

Abstract

The aim of this paper is to evaluate the impact of recognition and measurement of investment properties on the financial position and performance of insurance companies in Croatia. Insurance companies are large investors in financial instruments and an important financial intermediary in the financial markets. Insurance companies invest in financial instruments, but they also invest in properties, so investment properties can represent a significant item in their financial statements. In Croatia, 11 out of 15 insurance companies (73% of them) recognized investment properties, which implies the need to research the impact of recognizing and measuring of investment properties on the financial position and performance in this area. The period of the research covers five consecutive years from 2017 to 2021., and it is based on 11 insurance companies in Croatia that have recognized investment properties in their financial statements. In order to fulfil the objectives of the research, different statistics methods were used, such as descriptive statistical methods and correlation and regression analysis. The research showed that the cost model is applied to a slightly greater extent than the fair value model in insurance companies in Croatia. Also, the results of this research showed that investment properties do not significantly affect the financial position of insurance companies in Croatia, but have a statistically significant medium-strong impact on profitability. The study also pointed out that income and expenses from investment properties have a statistically significant medium-strong impact on net profit or loss of insurance companies in Croatia.