Title: THE IMPACT OF COVID-19 PANDEMIC ON AN INSURANCE COMPANY PERFORMANCE

Author: Mukdad Ibrahim

Abstract: The present study investigates the effect of the Covid-19 pandemic on the financial performance of National Insurance Corporation of Eritrea Share Company; the researcher used secondary data obtained from the company annual report’s spanning the years 2018 to 2023.The researcher relied upon measuring three key concepts that serve as accurate reflectors of financial performance. Liquidity, profitability, and efficiency were further broken down into groups of their relevant indicators and analyzed to measure the performance of the insurance company during the initial hard impact phase of the global economy. The finding revealed that liquidity indicators remained stable during covid-19 pandemic. Furthermore, the analyses showed a positive relationship between the three ratios that focus on liquidity, suggesting a strong positive associative relationship between the three liquidity indicators. Profitability indicator analysis produced somewhat similar results to that of the liquidity analysis. Profitability analysis showing a large degree of indicator stability during the pandemic, largely mirroring the findings of the liquidity analysis, However, correlation analyses found a mostly negative or weak relationship between the respective indicators within the profitability group, indicating that while the company saw slightly shrinking returns on equity during the initial hard landing phase of the pandemic, it compensated for that slight shortfall in the form of the increased net profits to net written premium that enjoyed during that same year (2020). This suggesting an expanding customer base as clients sought the protective value from catastrophic loss that insurance coverage can provide. Finally, efficiency analyses indicated that ratios which are pertained to investment derived revenues experienced a high level of instability, while the remaining efficiency focused ratios enjoyed high level of stability during the pandemic. Correlation analyses found the presence of overall negative or weak relationships within the efficiency grouping of indicators. Departing from this trend are both the two expense ratios as well as the two investment related ratios, where strong relationships where found. This may be explained by the common sub-focus of each pair of efficiency indicators, where each indicator pairing is designed to assess performance according to one area of financial management, namely expenditure management as well investment ability. While the efficiency group of indicators is also similarly designed to be valid reflectors of a company’s efficiency, external factors may be responsible for the misalignment in movement between efficiency focused indicators.

Keywords: Firm Performance, Accounting, Financial Crisis, Financial Risk.

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