The relationship between Investment Portfolio and Financial Performance in Albanian Insurance Companies

Abstract

The insurance sector plays an important role in the Albanian financial system. This industry represents a key and advanced position of the non-banking financial sector due to the features and dynamics that characterize it. In Albania, it is guided and standardized according to the Directives of the European Union Organizations and supervised by the Financial Supervisory Authority. The objective of this study is to determine the relationship that exists between investment portfolio and financial performance for the entire insurance sector in Albania. The study used secondary data provided by the annual reports of insurance companies and the official reports published by the Financial Supervisory Authority in Albania. The main analysis of the paper is based on the descriptive interpretation of secondary data for the period 2017-2022. The representative parameters of the investment portfolio of insurance companies used in the analysis are: the ratio of Government Securities to total assets; the ratio of Bank Deposits to total assets; the ratio of Land and Buildings to total assets and the ratio of Investments in Subordinated Undertakings to total assets. The representative variables of financial performance are ROA and ROE. In order to have a comparative analysis between companies, the study internally investigates the structure of investments in the portfolio of Life and Non-Life insurance companies.