| dc.description.abstract | The study sought to test the relationship betwee
n liquidity and profita
bility of insurance
companies in Kenya. The population of the study comprised of all the 49 insurance
companies registered with IRA as at 31
st
December 2013 (Appendix 1). A census was
carried out covering all the 49 insura
nce firms for five years period (1
st
January 2009 to
31
st
December 2013). The study used secondary data and the variables were deduced
from the audited financial statements of the
49 registered insuranc
e firms for financial
periods 2009 to 2013. The colle
cted data was analyzed us
ing descriptive statistics.
Profitability was measured by ROA, while liquidity was measured by Quick ratio and
Leverage ratio. Firm size as measured by l
og of net premium and
loss ratio were the
control variables. The t-test was used to determine the significance of the constant term
and the coefficients terms for each of the
regressions. The importance of each of the
regressions was determined
by carrying out the F-test at
95% confidence level. The
coefficient of determination
R
2
was used to measure the stre
ngth to which independent
variables explain the va
riations in the dependent variab
les. The analysis was done using
Statistical Package for Social Sciences (
SPSS) software version
21. The study established
a positive relationship between quick ratio and profitability of insurance companies in
Kenya. The study indicated that leverage rati
o has a negative influence on ROA. The
study established a positive relationship between
log of net premiums and ROA. Finally,
the study indicated a negativ
e but significant relations
hip between loss ratio and
profitability of the in
surance industry in Kenya. This st
udy recommends that managers
should maintain a trade off between profitability
and liquidity, invest in liquid assets to
improve liquidity as well as focus on
exploring opportunities for growth and
diversification and proper manage
ment of investment portfolios | en_US |
