Capital Adequacy and Financial Performance of Listed Insurance Firms at Nairobi Securities Exchange (NSE) in Kenya

Abstract

The purpose of this study was to examine the effect of capital adequacy on the financial performance of insurance firms listed at NSE in Kenya. A longitudinal research design was adopted in this study. The target population of the study composed of 6 insurance firms listed at the NSE in Kenya for periods from 2009 to 2018. Secondary data was collected from the annual audited financial statements of the insurance firms listed at NSE. Census of all six insurance firms listed at the NSE was adopted. STATA statistical software was used to analyze the data. The research findings were presented in tables and figures. The study established that listed insurance firms at NSE in Kenya had a positive RoA and positive RoE. The insurance firms also maintained good quality assets between the periods 2009 and 2018 thus enabling them to generate significant income. A significant variation in the total assets possessed by insurance firms listed at NSE was an evident that some firms accumulating huge volume of assets and others having small volumes of assets. There was a significant and positive correlation existed between capital adequacy and financial performance of the insurance companies listed at NSE in Kenya. The results also provided evidence that capital adequacy had statistically significant relationship with the financial performance of the insurance firms.