Abstract:
With the drastic changes take place in business sector, importance of Insurance
Companies increase gradually. They play a vital role and contribute significantly to
the development of the country. Hence, this study focuses on identifying the
determinants of financial performance of insurance companies in Sri Lanka. Financial
performance is measured through Return on Assets and eight independent variables
such as Leverage ratio, Liquidity, Age, Size, Underwriting Risk, Retention Ratio,
Tangibility and Volume of capital used for this study. Eight insurance companies
randomly selected as the sample of this study out of available 22 insurance
companies for the period of 2009-2014. Required secondary data gathered though
the Annual reports of each company, IBSL (Insurance Board of Sri Lanka) annual
reports and IBSL statistical review. This study use descriptive statistics and
regression analysis as the statistical tool. According to the study leverage ratio and
retention risk significantly effect of financial performance of Insurance companies
Further retention ratio and tangibility positively related with return on assets and age,
size, leverage, liquidity, volume of capital, underwriting risk negatively related with
return on assets.
