An application of Fixed-Effects Model (FEM) to evaluate financial performance of the Indian life insurance industry

Abstract

This paper aims at evaluation of financial performance of all the 24 life insurance companies operating in India and based on select parameters for a longer time frame ranging from 2009–2014. The fixed effects model (FEM) was selected and the regression equation was developed. The results showed that there is a significant difference between performance of the private sector companies and the public sector companies. The study estimates that public sector player has sound liquidity position compared to the private sector, whereas in the case of solvency position private sector has the upper hand compared to the public sector which shows stability in its solvency position. Our preferred Fixed effect Model (FEM) suggests that profitability of life insurers have significant positive relationship with liquidity, solvency and age.