Firm-Specific Factors Determine Profitability of Life Insurance Companies: Evidence From Indonesia

Abstract

Life insurance as the leading sector in Indonesia encountered ups and downs in profitability from 2008-2019 even though the gross premium has increased significantly over more the past decade. This study was conducted to analyze the firm-specific factors (company size, tangibility, company age, underwriting risk, leverage, and premium growth) that determine the profitability of life insurance companies registered in the Financial Service Authority in Indonesia during 2008-2019. Using a quantitative approach, this study performs a panel data regression analysis among the 19 samples from 2008-2019. The result shows evidence that tangibility and underwriting risk is the significant firm-specific factors in the perspective of The Resource-Based Theory, which negatively determines the profitability of life insurance companies in Indonesia. Meanwhile, company size, age, leverage, and premium growth were not found to be the firm-specific factors determining profitability.