PERFORMANCE ANALYSIS OF LISTED INSURANCE COMPANIES IN NIGERIA: A STOCHASTIC DOMINANCE APPROACH

Abstract

This study undertakes a comparative performance analysis of listed insurance companies in Nigeria for the period 2005 – 2015, using stochastic dominance analysis. For all intents and purposes, the stochastic dominance analysis of the twenty-four (24) listed insurance firms in Nigeria was carried out based on their profit or loss for the period of the study. Also, the top ten (10) insurance companies with the highest performance rate, complemented by the 11-year average performance, were selected for further comparative assessments. The comparative assesment results show that, Lasaco Assurance, Sovereign Trust Insurance, Consolidated Hallmark Insurance, Axamansard Insurance, Nem Insurance, Prestige Assurance, Staco Insurance, Aiico Insurance, Mutual Benefits Assurance and Regency Assurance emerged the top ten (10) performing insurance companies in Nigeria for the period of study. The findings from the stochastic dominance analysis revealed inter alia that, Axamansard Insurance stochastically dominates the Nigerian insurance market. This is closely followed by Lasaco Assurance, NEM Insurance as well as Sovereign Trust Insurance, Prestige Assurance and Aiico Insurance respectively. The empirical findings of this study suggest three likely circumstances that can drive the decision of any rational economic agent. First, individual or organization will tend to go for the insurance firm(s) that first-order stochastically dominate(s) the most, given all conceivable pair comparison. Second, the individual or organisation may be a risk-averse entity, in this regard, such individual or organization will go for the firm or firms that second-order stochastically dominate (s) the most. Finally, there are situations that neither makes the individual or organization better-off, nor worse-off. In this regard, the individual or organization will remain indifferent. This occurs when the outcomes returned inconclusive. In this respect, the individual or organization can choose either of the pair with no relative advantage.