Measuring the financial performance of insurance companies during the financial crisis

Abstract

Assessing the financial performance of insurance firms during periods of global economic difficulty has been a topic of great importance to the insurance industry. Interest in sound finance practices peaked in the years following the recession of 2008. Yet, there has been relatively little analysis of the UAE insurance industry and its performance during the financial crisis.The aim of this study is to measure the financial performance of three insurance companies operating in United Arab Emirates during the financial years 2006 to 2009, with the specific goal being to measure the impact of the financial crisis on performance. The analysis examines company performance on key performance indicators such as profitability, liquidity, capital structure and market performance indicators over the years 2006 to 2009. The findings show generally high levels of instability for profitability indicators. Regarding both liquidity and capital structure indicators, the firms in question experienced lower levels of variability and instability across the board. Performance on the earnings per share measure experienced a higher level of volatility, in contrast to the market value per share indicator which remained relatively stable throughout the period in question. Furthermore, profitability levels showed a systemic & notable decline in the crisis year 2008.