The document analyzes the determinants of profitability in Pakistan's insurance sector. It examines how factors like company size, capital levels, leverage, and loss ratios impact return on assets (ROA). Regression analysis is used to analyze data from 14 insurance firms. The study finds some factors like size have a positive impact on profits, while others like leverage negatively influence ROA. It aims to help insurance firms better understand key drivers of performance.

2. TOPIC
DETERMINANTS OF INSURANCE COMPANIES
PROFITABILITY;
AN ANALYSIS OF INSURANCE SECTOR OF
PAKISTAN

3. INTRODUCTION
• The financial sector in Pakistan has proven to be very resilient in the face of difficult
macroeconomic conditions and international developments. The insurance industry now has a
big impact on businesses, households, and economies. The insurance sector enables households
to protect themselves from hazards and to provide them with financial security.
• Therefore, the aim of this paper is to obviously identify the key determinants of profitability of
insurance companies within the country.
• . Insurance sector has its own importance because it's responsible to supply proficient help,
channel funds, utilization of resources in optimal manner and investor’s treatment. Under the
umbrella of economic sector, Insurance sector plays a pivotal role of regulating funds to
different industries thereby contributing major inflows towards economic and financial growth.

4. PROBLEM STATEMENT
Life insurance sector is growing at a fast pace in Pakistan but despite that this area is less explored
in Pakistan. The paper adds body of knowledge by extending prior research and contributes to
literature. It is the first comprehensive research on the determinants of profitability of insurance
companies by considering the firm specific factors (Internal factors).
Hence insurance sector profitability is strongly influenced by the macroeconomic environment in
which it is working that has not yet addressed in insurance industry of Pakistan.
Moreover dynamic analysis of the insurance companies is an important tool Impact of Internal
(Micro) Factors on Profitability of Insurance Companies. Therefore the in-depth analysis of
determinants of financial performance of life insurance industry in Pakistan on the operating
income will paves the way for the development and improvement of sector.

5. RESEARCH OBJECTIVES
 The aim of the current study is to examine empirically the
factors affecting the profitability of the Pakistani insurance
companies.
 The analysis is based on a dataset relative to 14 insurance
companies in Pakistan. Future studies analyze the
microeconomic factors affecting the profitability of the
insurance sector in Pakistan.

6. DATA AND METHODOLOGY
The current review depends on firm-level information. The reliant variable (benefit)
is estimated by the profit from resources (ROA) proportion. It is notable that the
ROA proportion catches how much organizations' benefits created by absolute
resources and is the most utilized intermediary to catch firms' productivity. As to
possible determinants of safety net providers' productivity, the review thinks about a
wide scope of likely factors.
The numerous relapse model is utilized to distinguish the connection between the
productivity of insurance agency and period of organization, influence proportion,
misfortune proportion, organization size and volume of capital. Information will be
broke down with one ward variable (benefit) and five autonomous factors (period
of organizations, size of organizations, influence proportion, misfortune proportion
and volume of capital).

7. SIGNIFICANCE OF THE STUDY
• The research is conducted on the “The impact of Firm Size on
Profitability.
• The aim of this study was to know how firm size can have a
bearing on profitability during a developing country like Pakistan
and to judge what variables play a vital role in it.
• The research relies on statistical analysis model, return on assets
(ROA) and which are the dependent variables during this study.
• Overall, the connection is of a significantly negative impact there
with of firm size on the profitability which shows a mix of positive
and negative impact yet.

8. LITERATURE REVIEW
• Hifza (2011), in her research article, analyzed the assorted factors affecting profitability of insurance
companies in Pakistan for the amount 2004-05 to 2008-09. The findings of the study showed that there
was no relationship between profitability and age of the corporate but there was positive association
between size of the corporate and profitability. The study also showed that the degree of capital was
positively related with profitability whereas ratio and leverage ratio indicated negative relationship with
profitability. The researcher suggested that there should be a reverse and significant relationship between
leverage ratio and ratio as independent variables so profitability are often improved.
• Anila (2017) explored the financial performance of Insurance industries with reference with the impact of
intellectual capital. The study was conducted on the information and knowledge extracted from the reports
of a range of Insurance Companies. VAIC (Value Added Intellectual Coefficient) approach was utilized
in this research study to research the performance of Insurance firms. Structural capital, human capital,
return on assets and other financial instruments were wont to measure the financial performance of
Pakistani Insurance, multiple regressions was applied for statistical analysis. The findings of the research
indicate that the VAIC value is higher within the case of conventional Insurance after they were contrasted
with the Islamic Insurance.

9. CONCEPTUAL FRAMEWORK OF THE VARIABLES USED
IN THE MODEL
Independent variables
Dependent variable
Firm specific internal factors
Insurers’ size
Leverage ratio
ROA
Capital ratio
Liquidity ratio
Loss ratio

10. HYPOTHESES DEVELOPMENT
1. H1: There is a positive relationship between age and profitability of insurance
companies in Pakistan.
2. H2: There is a positive relationship between company size and profitability of insurance
companies in Pakistan.
3. H3: Any increase in volume of capital is positively affected the expansion of activities of
insurance companies of Pakistan.
4. H4: There is a negative relationship between leverage and profitability for Pakistani
insurance companies.
5. H5: There is a negative relationship between loss ratio and profitability of insurance
company in Pakistan.

11. DATA ANALYSIS

12. FINDINGS

13. CONCLUSION
In the current study the financial performance of insurance sector of
Pakistan was analyzed in depth by using the determinants of its
profitability. The financial performance of insurance sector was
measured based on dependent variable calculated via descriptive
analysis: Regression, correlation, and standard deviation. Using these
the variable insurer can confine the key operations of Insurance
sector.

14. RECOMMENDATIONS
The outcomes of the given research are concentrated on the overall insurance
sector including Takaful, life, and non-life insurance. And these outcomes can be
helpful for the underwriter and provide an important direction to the
administrators to effectively utilize the assets as well as resources in an extra
effective manner.
Moreover, for the authenticity and reliability of outcome, it is suggested that
analysts can enlarge the data gathering and compare the Pakistani sector to other
nation’s sector to better understand the link among variables both external and
internal. In addition to this study analyst also finds which elements effects the
profitability that may affect the insurer size.