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Research Paper | Management | Indonesia | Volume 6 Issue 1, January 2017

Firm Specific Factors and Macroeconomic Determinant of Life Insurance Companies? Profitability in Indonesia

Irma Oktiani | DS Priyarsono ^[2] | Trias Andati ^[5]

Abstract: Financial analysis is an important toolsfor insurance companies to enhance the profitability. In developing country, such as Indonesia, the empirical studies of firm-specific and macroeconomic factors are not so exhaustively analyzed. Therefore, the aim of this paper is to analyze the firm-specific factors and macroeconomic determinants of life insurance companies profitability in Indonesia using panel data during the period 2010 to 2014. The study examines the firm-specifics factors consist of size of company, equity capital, premium growth, risk based capital ratio, leverage ratio and liquidity ratio, while macroeconomic factor is inflation rate. The findings indicate negative and significant influence of premium growth and risk based capital on profitability, and significant positive influence of equity capital, liquidity ratio, leverage ratio and size of company on profitability. Additionally, results reveal that inflation rate is not significantly influence the profitability of life insurance companies. The other finding iscompanies that have good level of total assets, equity capital, leverage ratio and liquidity ratios tend to have good achievement ROA ratio. Companies should be able calculating technical reserves appropriately, construct the optimal portfolio in order to be able to generate maximum profits and streamline expenses operating expenses to maintain the achievement of good profitability.

Keywords: life insurance, profitability, panel data, firm-specific factors and macroeconomic determinants

Edition: Volume 6 Issue 1, January 2017,

Pages: 639 - 644

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