Asset Liability Management and the Profitability of the Life Insurance Industry in Nigeria

Abstract

This study is a panel data analysis of asset liability management and its effect on the profitability of life insurance companies in Nigeria. An inappropriate asset liability mix can be detrimental to the profitability of the organization. The objective of this study is to assess the relationship between assets, liabilities and profitability of life insurance companies in Nigeria. The expost facto research design is adopted and cross sectional data is sourced from ten life insurance companies covering years 2008-2019. Descriptive analysis and inferential statistics are carried out to test the suitability of the data for the study. Data are further subjected to the fixed effect and random effect regressions. Hausman test is carried out and the null hypothesis of a random effect model is rejected.  The results reveal that assets largely have a statistically significant relationship with profitability, while some liabilities are significant. This provides evidence that profitability is associated with balance sheet items and a proper asset liability management has a direct effect on the overall profitability of the life insurance industry. It is therefore recommended that insurers should inculcate proper asset liability management policies and channel more of their resources to assets/liabilities which have the highest positive influence on profitability.