Analysis of the effect of cash management on the solvency and profitability of insurance companies in Benin

Abstract

The objective of this research is to analyse the effect of cash management on the solvency and profitability of insurance companies in Benin. To do this, we used data from the financial statements for the period 2017 to 2021 published by the Conseil des Ministres des Assurances (CMA) and the Direction des Assurances du Bénin. The study covered twelve (12) insurance companies in Benin and was carried out using descriptive analysis (univariate and bivariate) and econometric analysis. The initial results show that there is a non-significant linear relationship between the company's cash position and solvency on the one hand, and economic and financial profitability on the other. This relationship is significant for operating and commercial profitability on the one hand and the net insurance margin on the other. The econometric results prove that the level of cash-flow does not significantly explain the solvency and the economic and financial profitability of an insurance company. However, the level of cash has a negative and significant effect on operating and commercial profitability on the one hand and a positive and significant effect on the net insurance margin on the other. To improve the effect of cash management on a company's solvency and profitability, operational recommendations have been made based on the results of our analyses. The study suffers from certain limitations, namely other types of profitability of an insurance company, such as underwriting profitability or technical profitability, net profitability and profitability by business segment, have not been addressed in this study. Other studies may be conducted to address these aspects of the subject. Operational recommendations have been made to them to control risks of all kinds. There is no funding for this study.