FACTOR AFFECTING THE FINANCIAL PERFORMANCE OF LIFE INSURANCE COMPANIES IN NEPAL

This study examined the determinants of financial performance of life insurance companies in Nepal by analyzing the effects of liquidity, leverage, firm size, market share, and underwriting risk on Return on Assets (ROA). The findings reveal that firm size has a negative and significant impact on ROA, suggesting that excessive expansion may create operational complexities, higher administrative costs, and efficiency challenges that reduce profitability. In contrast, market share has a positive and significant effect on ROA, indicating that firms with stronger competitive positions benefit from greater premium generation, customer reach, and market advantages. The results further show that liquidity and leverage do not have a statistically significant effect on financial performance. Although leverage demonstrates a positive relationship with ROA, its impact is insufficient to significantly improve profitability. Similarly, underwriting risk has a positive but insignificant relationship with ROA, implying that risk-taking activities alone do not guarantee improved financial performance unless supported by effective risk management practices. The study highlights that Nepalese life insurance companies should focus on strengthening market competitiveness while maintaining efficient organizational structures. Managers should emphasize sustainable growth strategies, effective resource utilization, and sound underwriting practices to enhance profitability. Regulators and policymakers may also consider policies that encourage operational efficiency and competitive development within the insurance sector.

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