Title:
Effect of Operating Cash Flow Ratio and Net Premiums to Policyholders’ Surplus Ratio on Financial Performance of Listed Insurance Companies in Nigeria

Authors:
MAIRAFI, S. L., IDRIS, A. A. and OLADEJO, G. T., Nigeria

Abstract:

This study aims to examine the effect of the operating cash flow ratio and the net premiums to policyholders’ ratio on the financial performance of listed insurance companies in Nigeria. Ex-post facto research design was adopted, while a secondary source of data collection was employed. Data were collected from the annual financial reports of six listed insurance companies. The study utilized panel regression to analyse the data from a sample of six (6) listed insurance companies on the Nigerian Exchange Group (NGX) from 2015 to 2024. The results of the panel regression revealed that the operating cash flow ratio and net premiums to policyholders’ ratio have a significant effect on the financial performance of the listed insurance companies in Nigeria. The study recommends that Nigerian insurance companies should move beyond relying solely on profit and loss statements and integrate operating cash flow ratio dashboards into their internal performance management systems. Regular monthly or quarterly cash flow monitoring will help management detect early warning signals of liquidity stress, especially in underwriting and claims operations. Also, Nigerian insurance companies should develop and enforce internal underwriting capacity limits tied directly to their policyholders’ surplus. This ensures that the volume of net premiums written is proportionate to available capital, preserving solvency and profitability. Boards should periodically review these limits using actuarial models to maintain a balanced net premiums to policyholders’ surplus ratio, ideally within a range that supports growth without eroding financial stability.

DOI: https://doi.org/10.51505/IJEBMR.2025.91201