Profitability Policy Research Articles

Japan

Weak growth and low interest rates, together with underlying demographic headwinds, are posing chronic challenges for the financial system. Despite accommodative financial conditions, sluggish domestic demand have dampened investment and domestic credit growth. Combined with low interest rates and a flat yield curve, these factors are posing a sustained challenge for the financial system—one of the largest and most sophisticated in the world. To a significant extent, factors behind this environment are structural in nature, reflecting in particular demographic headwinds. Profitability of banks and life insurers is low, and net interest margins are shrinking. Since many advanced economies are likely to face similar headwinds in the future, the importance of Japan’s response to these challenges extends beyond its borders.

Marketing Channel, Corporate Reputation and Profitability of Life Insurers

This paper investigates the impact of marketing channel on corporate reputation and profitability of life insurers based on the evidence of bancassurance. With consideration of endogeneity among the variables, the result indicates that marketing through bancassuance reduces underwriting service quality and thus negatively affects insurer’s reputation. On the other hand, bancasurrance shows an advantage in cutting underwriting expenses and consequently contributes to profitability. The result is opposite to that of traditional channel of salespersons. This paper also finds that a positive and sustained relation between corporate reputation and profitability. The result implies that life insurers must be cautious of marketing through bancassurance because its negative impact on underwriting service quality may counteract its advantage of cost-saving due to reputation deteriorating in the long term.

The impact of natural disasters on insurers’ profitability: Evidence from Property/Casualty Insurance company in United States

Natural disasters affect not only families and businesses, but also governments and insurance companies. They cause major losses and encourage insurers to take various measures to stabilize their technical performance. This paper aims to examine the impact of natural disasters on the United States (U.S) Property/Casualty insurance profitability for the 2008–2012 period. The results obtained indicate that volume of capital and premium to surplus ratio have a significant positive impact on profitability. While, loss ratio, unexpected frequency and blockbuster have a negative effect on insures’ profitability.

Prediction of Future Mortality in China under the New Demographic Norm

In recent years, China's population life expectancy into the rapid growth stage, this population growth caused by the rapid growth of a series of risks known as longevity risk. The increase in life expectancy concerns the future survival of individuals, as well as the profitability and solvency of commercial insurers, and most importantly, the impact on pension plans throughout the country. Therefore, it is necessary to accurately predict future mortality in China at this stage. In this paper, the Lee-Carter model least square method is used to estimate the parameters. Secondly, according to the Box-Jenkins method, the ARIMA model is used to fit the forecasting of life expectancy and life expectancy.

Penerapan Manajemen Risiko Perusahaan dan Nilai Perusahaan di Sektor Konstruksi dan Properti

Implementation of Enterprise Risk Management and Firms' Value at Construction and Property Sectors The objective of this study is to emphasize the effect of enterprise risk management (ERM) and control variable i.e: firm size, leverage, profitability, sales growth, shares volatility, and dividend policy toward firm value. This research employs multiple regressions as tool of analysis. The object of this research is construction and property firms that listed on BEI in period 2012-2014. The result of this research showed that ERM and control variable have a significant effect on firm value. However, partially, ERM doesn’t have significant effect on firm value. Further more leverage and sales growth variable have significant effect on firm value. The other funding is that size, leverage and dividend policy have significant correlation on ERM. DOI: 10.15408/ess.v7i2.4981

Intellectual capital and profitability in an emerging insurance market

PurposeThe purpose of this paper is to examine the relationship between intellectual capital (IC) and profitability of insurance companies in Ghana.Design/methodology/approachData on 36 life and non-life insurance companies from 2007 to 2011 are employed to estimate the value added intellectual coefficient of Pulic (2004, 2008). Using return on assets and underwriting profit as indicators of profitability, the ordinary least squares panel corrected standard errors of Beck and Katz (2005) is used in estimating the relationship in the presence of serial correlation and heteroskedasticity. Leverage, underwriting risk and insurers’ size are used as control variables.FindingsNon-life insurers have high IC performance comparative to life insurers. This study finds a significant positive relationship between IC and profitability of insurers in Ghana while human capital efficiency is the main driver of insurers’ IC performance.Practical implicationsThe study discusses relevance of IC for management of insurance companies in Ghana and other emerging insurance markets in Africa.Originality/valueThis appears to be the first study to examine the impact of IC on profitability of a developing insurance market in Africa.

The landscape of olive groves as a driver of the rural economy

This study evaluates how landscape changes made in order to improve the visual quality of olive groves may trigger first and second-order effects (FOEs and SOEs) on the rural economy. The choice experiment method is combined with the probability of visiting to estimate the marginal increase in recreational demand derived from the combination of three landscape elements: green cover, stone walls and woodland islets. The results suggest that the improvement of the aesthetic value of landscape (mainly through green covers and stone walls) creates a real, positive asset (due to its FOEs and SOEs) for the local economies in rural areas. The promotion of the recreational value of these areas to attract more visitors and so bring in more income could be a profitable policy, which could be implemented by hybridizing the current Agri-environmental scheme with a Payment for Ecosystem Services approach.

Improving the assessment of the non-life insurance market development level in Ukraine

Nowadays the non-life insurance market in Ukraine is on the stage of development. Therefore, it is necessary to assess the level of development of the non-life insurance market in Ukraine and to propose recommendations for improvement the activity of the non-life insurance companies. The article deals with the peculiarities of the insurer companies in Ukraine that carry out insurance other, than life-insurance. It was analyzed the national non-life insurance market during 2005-2015 that helped to determine the main problems of its development. For assessment of the non-life insurance market development level there were selected the indexes of amount of insurance companies, the amount of the insurance contracts and the volume of responsibility after them, the middle amount covered on one contract of insurance, the volume of gross and clean insurance bonuses, the level of diversification of insurance brief-cases of insurers, the strength of the insurance market, profitability of insurance and investment activity of insurance companies. Using correlation analysis it was eliminated the multicollinearity between selected parameters. It was calculated the integral indicator of the non-life insurance market development level in Ukraine using the method of taxonomy. On the basis of the scale authors conclude that during the analyzed period (2008-2015) the integral indicator of the insurance market development was not high. Only in 2010 and 2012 the insurance market development in Ukraine has reached average level. At all other times the activity of the insurance market was low.

AN ANALYSIS OF THE EFFECT OF PRICING STRATEGIES ON PROFITABILITY OF INSURANCE FIRMS IN KENYA

Purpose: The objectives of the study were to establish the effect of economy, skimming, penetration and premium pricing strategies on the profitability of insurance firms in Kenya.Methodology:The descriptive research design was preferred to other research designs because it reports the status of study variables. The population of study was the 45 insurance companies operating in Kenya as at 31st December 2012. Data was drawn from a period of five (5) years that is 2008-2012. The sample of this study was 10% of the sales workforce which comprised of 900 employees from the 45 insurance companies. The sample was generated by purposively sampling two employees from each insurance company.The researcher collected primary data with the help of a questionnaire. The primary data obtained from the questionnaires was summarized and analyzed by use of descriptive and inferential statistical techniques.Results:Regression and correlation results indicated that there was a statistically significant and positive relationship between economy pricing, skimming pricing, penetration pricing, premium pricing, price optimization strategies, strategies and profitability. Results show that economy pricing, skimming pricing, penetration pricing, premium pricing, price optimization strategies have a positive effect on the profitability of insurance companies. The correlation between profitability and penetration, premium and price optimization strategies was strong and positive. The regression results indicate that the variables; economy pricing, penetration pricing, premium pricing, price optimization strategy and skimming pricing were satisfactorily explaining profitability.Policy recommendation: The study recommends that insurance companies put in place measures assess the most effective pricing strategy to reduce product costs and thus increase profitability whenever such a strategy is used.

EFFECT OF PREMIUM PRICING STRATEGY ON THE PROFITABILITY OF INSURANCE FIRMS IN KENYA.

Purpose: The objectives of the study were to establish of premium pricing strategy on the profitability of insurance firms in Kenya..Methodology:The descriptive research design was preferred to other research designs because it reports the status of study variables. The population of study was the 45 insurance companies operating in Kenya as at 31st December 2012. Data was drawn from a period of five (5) years that is 2008-2012. The sample of this study was 10% of the sales workforce which comprised of 900 employees from the 45 insurance companies. The sample was generated by purposively sampling two employees from each insurance company.The researcher collected primary data with the help of a questionnaire. The primary data obtained from the questionnaires was summarized and analyzed by use of descriptive and inferential statistical techniques.Results:The descriptive statistics indicated that majority of the respondents agreed that their firm positively influenced consumer’s perception through fair pricing in setting premium prices, when using premium pricing our firm tried to reduce operation costs as much as possible and ensured they are controlled, their firm had successfully adopted effective premium pricing strategies in the recent years, their premium pricing strategy had led to more sales in their insurance products and their firm engaged professional expertise in implementation of their premium pricing strategy. Regression and correlation results indicated that there was a statistically significant and positive relationship between premium pricing strategies and profitability. These results implied that premium pricing has a positive effect on the profitability of insurance companies.Policy recommendation: The study recommends that insurance companies put in place measures assess the most effective premium pricing strategy to reduce product costs and thus increase profitability whenever such a strategy is used.

EFFECT OF PENETRATION PRICING STRATEGY ON THE PROFITABILITY OF INSURANCE FIRMS IN KENYA.

Purpose: The objectives of the study were to establish the To determine the effect of penetration pricing strategy on the profitability of insurance firms in Kenya.Methodology:The descriptive research design was preferred to other research designs because it reports the status of study variables. The population of study was the 45 insurance companies operating in Kenya as at 31st December 2012. Data was drawn from a period of five (5) years that is 2008-2012. The sample of this study was 10% of the sales workforce which comprised of 900 employees from the 45 insurance companies. The sample was generated by purposively sampling two employees from each insurance company.The researcher collected primary data with the help of a questionnaire. The primary data obtained from the questionnaires was summarized and analyzed by use of descriptive and inferential statistical techniques.Results:Regression and correlation results indicated that there was a statistically significant and positive relationship between penetration pricing strategies and profitability. These results implied that penetration pricing has a positive effect on the profitability of insurance companies.Policy recommendation: The study recommends that insurance companies put in place measures assess the most effective pricing strategy to reduce product costs and thus increase profitability whenever such a strategy is used.

PENGARUH KEBIJAKAN DIVIDEN DALAM MEMEDIASI RETURN ON ASSET DAN FIRM SIZE TERHADAP RETURN SAHAM (Studi Pada Perusahaan Yang Tergabung Dalam LQ45 di Bursa Efek Indonesia (BEI) Tahun 2011 – 2014)

This study was conducted to examine the influence of fundamental factors of ROA and firm size on dividend policy. And furthermore the influence of profitability, liquidity and dividend policy to return stock in companies incorporated in the LQ45 listed on the Indonesia Stock Exchange for the period 2011-2014. The sampling technique used in this research is purposive sampling with criteria : (1) It is listed in Indonesia Stock Exchange 2011-2014. (2) It is always seem annual financial statements for the period 2011-2014. (3) It is always pay dividends. The data required in this study were drawn from the Indonesian Capital Market Directory (ICMD) from 2011 to 2014 consisting of 16 companies. Multiple regression analysis of the data. Hypothesis test used the t-statistic at the 5% significance level. The results showed ROA, firm size and dividend policy have a significant effect on stock returns. These results indicate that the performance of the fundamental factors of profitability, firm size and dividend policy on stock returns are used by investors to predict stock returns companies incorporated in the LQ45 listed in Indonesia Stock Exchange in 2011-2014. Key Words: Stock Return, dividend policy, ROA, firm size

PENGARUH CORPORATE GOVERNANCE MECHANISM TERHADAP NILAI PERUSAHAAN MELALUI PERTUMBUHAN, PROFITABILITAS DAN KEBIJAKAN DIVIDEN

The purpose of this research is to analyze the influence of corporate governance mechanisms to the value of the firm through growth, profitability and dividend policy. The population of this study are all of manufacturing companies listed on the Indonesia Stock Exchange for the period of 2000-2012. The sampling method used in this study was purposive sampling, with the criteria that the company distributed cash dividends and have an independent member of the board of trustees. This study proves that the growth of the company affecting the profitability and the firmsvalue, despite the fact that the company reduced its dividend payments. Sobel’s test result shows that firm’s growth effect to firm value mediating by profitability significantly, represented by return on equity. Corporate governance mechanisms plays an important role in preventing unproductively growth of companies that have reached the stage of maturity. The intensification of the firms value, also influenced by its ability to increase the profitability and dividend payments. Institutional ownership and board size as a proxy for corporate governance mechanism plays an important part to encourage companies to improve their return on equity, while the independent board persuade companies to increase the dividend payments. In this study the board size variable has shown a very important role on the increase of profitability, dividend payments, and therealizations of the value of the company.

An investigation of the relationship between firm growth factors, business structure and profitability for a developing non-life insurance market: evidence from the Taiwan

This study investigates the factors of firm growth and analyses profitability by sourcing panel data of the non-life insurance industry in Taiwan. I initially utilise logistic regression to examine the insurer's growth factors. Further, I examine the effect of the relationship between firm growth and business structure on the insurer's profitability. The findings reveal that reinsurance, input costs, return on investment (ROI), and firm age have significant impact on firm growth, but firm size and firm growth are independent of each other. I also find that underwriting risk, input costs, ROI, and financial holding group influence the insurer's profitability. Furthermore, firm growth and business structure have different significant impact on firms profitability in the profit ratio model and the operating ratio model, respectively. My results have practical implications for the insurance industry and competent authorities in Taiwan.

An investigation of the relationship between firm growth factors, business structure and profitability for a developing non-life insurance market: evidence from the Taiwan

This study investigates the factors of firm growth and analyses profitability by sourcing panel data of the non-life insurance industry in Taiwan. I initially utilise logistic regression to examine the insurer's growth factors. Further, I examine the effect of the relationship between firm growth and business structure on the insurer's profitability. The findings reveal that reinsurance, input costs, return on investment (ROI), and firm age have significant impact on firm growth, but firm size and firm growth are independent of each other. I also find that underwriting risk, input costs, ROI, and financial holding group influence the insurer's profitability. Furthermore, firm growth and business structure have different significant impact on firms profitability in the profit ratio model and the operating ratio model, respectively. My results have practical implications for the insurance industry and competent authorities in Taiwan.

A Stochastic Forward-Looking Model to Assess the Profitability and Solvency of European Insurers

In this paper, we develop an analytical framework for conducting forward-looking assessments of profitability and solvency of the main euro area insurance sectors. We model the balance sheet of an insurance company encompassing both life and non-life business and we calibrate it using country level data to make it representative of the major euro area insurance markets. Then, we project this representative balance sheet forward under stochastic capital markets, stochastic mortality developments and stochastic claims. The model highlights the potential threats to insurers solvency and profitability stemming from a sustained period of low interest rates particularly in those markets which are largely exposed to reinvestment risks due to the relatively high guarantees and generous profit participation schemes. The model also proves how the resilience of insurers to adverse financial developments heavily depends on the diversification of their business mix. Finally, the model identifies potential negative spillovers between life and non-life business thorugh the redistribution of capital within groups.

CATEGORY MANAGEMENT IN THE MANAGEMENT OF MINIMUM ASSORTMENT OF THE PHARMACEUTICAL ORGANIZATION

The main principle of the category management is the management of product category as a separate business unit. Category management directs the activities of the pharmaceutical organization to meet the consumer requirements and to provide customers with maximum benefits, which are expressed in the improved assortment, the attractive prices, the reduction of cases of lack of necessary goods, the simplified purchase process. In article the structure of the category management and its role in the minimum pharmaceutical assortment, a complex of the theoretical and practical issues affecting interrelation of the list of vital and essential medicines and the minimum range of medicines are considered. A number of the new elements supplementing the concept of category management is offered, and the corresponding generalizations are made. The objective of the research is to study the influence of category management on the structure in management of the minimum assortment of medicines of the pharmaceutical organization. Materials and methods. In the course of the solution of the set tasks, the methods of marketing and economic-mathematical analysis were used. Results and discussion. In the analysis of the assortment list of medicines for medical application, which is obligatory for the pharmaceutical enterprises of all forms of ownership, it was revealed that this assortment list is based on the List of Vital Essential and Necessary (VEN) Drugs. The results of the analysis of the obligatory assortment list from the position of internal category management showed that 77.45% are medicines of the list of VEN Drugs; 46.08% are medicines of non-prescription dispensing. Proceeding from this it follows that the worthy, profitable price policy can be conducted only with 22.55% of the list; to develop standards of merchandising with 46.05%. The category management gives an opportunity to the pharmaceutical organization to specify its competitive strategy and to plan actions for management of the range. Conclusion. Advantages of the application of the category management in management of the minimum range of medicines of the pharmaceutical organization consist in the increase in the effectiveness of measures to stimulate demand, competitive pricing, and efficient merchandising. One of the main functions of the category management is to enhance the effectiveness of the interaction between the distributor (the supplier, the manufacturer) and the pharmaceutical organization.

The Effect of Tort Reform on Medical Malpractice Insurance Market Trends

In this article, we examine the extent to which the timing of reforms to the tort liability system coincides with changes in medical malpractice insurance market conditions. Our research is motivated by the fact that, while policy discussions and academic research pertaining to the merits of tort reform often center on ex post effects, it is unclear whether reforms to the tort liability system are responsible for softening conditions in a medical malpractice insurance market that was previously deteriorating. Our analysis of tort reforms in the mid‐2000s finds little evidence that state‐level medical malpractice insurance losses incurred, premiums earned, or incurred loss ratios were increasing in the years immediately prior to the enactment of various tort reforms, making it difficult to attribute the observed softening of the medical malpractice insurance market that occurred in the mid to late 2000s to the enactment of tort reforms. Our conclusion is that, while tort reforms are effective policy tools for lowering levels of medical malpractice insurance losses incurred and improving insurer profitability, there is little evidence to suggest that reforms are an effective method for softening a medical malpractice insurance marketplace that is otherwise steadily deteriorating.

PERAN PROFITABILITAS DAN LIKUIDITAS SERTA DIVIDEN PAYOUT RATIO TERHADAP RETURN SAHAM

This study was conducted to examine the influence of fundamental factors of profitability and liquidity on dividend policy (DPR). And furthermore the influence of profitability, liquidity and dividend policy (DPR) to return stock in companies incorporated in the Jakarta Islamic Index listed on the Indonesia Stock Exchange for the period 2010-2013. The sampling technique used in this research is purposive sampling with criteria : (1) It is listed in Indonesia Stock Exchange 2010-2013. (2) It is always seem annual financial statements for the period 2010-2013. (3) It is always pay dividends. The data required in this study were drawn from the Indonesian Capital Market Directory (ICMD) from 2010 to 2013 consisting of 20 companies. Multiple regression analysis of the data. Hypothesis test used the t-statistic at the 5% significance level. The results showed profitability and dividend policy (DPR) have a significant effect on stock returns. These results indicate that the performance of the fundamental factors of profitability and dividend payout on stock returns are used by investors to predict stock returns manufacturing companies listed in Indonesia Stock Exchange in 2010-2013.

Governing in a trust deficit

A key component in the exchange relationship between government and business in modern liberal democracies is the level of public trust that each institution enjoys. However, trust does not affect both equally. A fall in trust for government is likely to diminish a government's policy discretion much more than an equivalent fall in trust for business will diminish a business actor's capacity to make profit or shape public policy. In addition, there are good reasons to believe that government will tend to find it more difficult than business to maintain trust from its stakeholders, or to recover it when lost. In this paper, I insert a role for public trust dynamics into Lindblom's theory of the structural power of business. I then return to the debate in this journal on business power and the 2010 Australian mining tax I show that the existing accounts omit the role of trust in the conflict and as a result “discover” much more incompetence from the Australian government than really existed.