FINANCIAL PERFORMANCE ANALYSIS AND EVALUATION OF LIFE / RETIREMENT INSURANCE AND NON-LIFE INSURANCE SECTORS IN TURKEY

Yıl 2013, Cilt: 13 Sayı: 26, 355 - 371, 01.12.2013

Yılmaz Akyüz Zübeyde Kaya

Öz

Insurance is a contract by which insurer guarantees to pay a certain amount of
compensation to an individual or his/her inheritors- on condition that a certain amount of
premium is paid - when a risk really occurs that is likely to cause certain financially
measurable damage to the benefits of that individual or when certain events occur in
individual’s life due to his/her old age or his/her death. As the above definition states, it is
necessary to establish a system to provide financial assurance for individuals in case of
the occurrence of unforeseen situations that are likely to give harm to the lives, properties
or benefits of these individuals or third parties – only when there is a responsibility for
these parties. The sector in charge of this financial assurance is “insurance sector”.
Thanks to comprehensive insurance systems, the individuals who encounter similar
dangers or risks have the chance to cope with these dangers and risks collaboratively as
well. In insurance sector, “risk” refers to the danger that becomes a threat for financially
measurable benefits of individuals. The strong or weak possibility of the risks is the most
significant factor used while making insurance premium calculations. Risks are evaluated
by assigning them a value ranging between 0 % and 100 %. Neither 0 % nor 100 % risks
are insured by insurance agencies. Insurance premium calculation principles are
determined on the basis of the assumption that risks will have the" risk value" between
"0" and "100".
Insurance is one of the instruments that protect us against certain risks. In
addition, the sector has important functions such as providing effective risk management
for the various risks encountered by individuals, companies and institutions. According to
the related literature, insurance types are categorized into two main groups: namely life
and non-life insurance. Non-life insurance mainly covers material damages and losses.
The categories under this main group are “fire”, “accident”, “shipping” and “engineering”
insurances. Life insurance is based on the idea that an individual would like to save
money for their beloved ones after his/her death or to guarantee a better life standards
during his/her old ages.
Insurance sector is a growing sector with its strong financial structure. The
sector attracts the attention of not only local investors but also foreign ones as well.
Therefore, the interest in the sector is increasing and the market is becoming more and
more competitive. In addition, the sector is a significant financial sector that considerably
contributes to the development of countries. Since insurance sector provides long-term
financial source for the financial system, it can be said that there is a linear relationship
between the development of the sector and economic development. 2008 economic crisis
negatively affected insurance sector like other sectors as well due to its enormous global
effect. As a result, the premium production in 2008 and 2009 was very low compared to
other years. As for Turkey, it is observed that non-life insurance premium production
increase has been lower than the inflation rate for the last two years and sector premium
production has considerably shrunk accordingly.
As for the share of foreign investment in the funds in 2007, the percentage was
higher for life / retirement insurance companies than non-life ones. When the figures from the following years are examined, it is seen that this situation is similar except for the year
2009. In general, the share of foreign investment in the funds has been increasing year by
year. Accordingly, the share of foreign investment in the sector was 67% as of 2011,
when a total of 59 insurance, reassurance and retirement companies were actively
operating in the sector. The distribution of these companies according to subsectors are as
follows: 35 non-life insurance, 14 life / retirement insurance, 9 life insurance and 1
reassurance. While the total assets of financial sector of insurance sector was 776,0 in
2007, this figure increased to 1,512,2 in 2011 with an increase of 100%. The insurance
sector accounts for 3% of overall financial sector according to recent figures.
The aim of the current study is to evaluate the performance of non-life insurance
companies and life/retirement insurance companies at sector level between 2007 and 2011
by using TOPSIS (Technique for Order Preference by Similarity to Ideal Solutions)
method, a multi-criteria decision analysis method with a six-step application model. In the
first step, decision matrix is created and, in the second, a standard decision matrix. The
third step is about forming a weighted decision matrix, and the fourth consists of the best
and the worst solutions determined. The calculations of discriminations are made in step
five. In the last step, the relative similarity to ideal solution is calculated. For the purposes
of analysis, a total of 10 sector-specific financial performance ratios were used in the
study: namely, premium to equity ratio; equity to total assets ratio; equity to technical
reserves ratio; premium creditors to equity ratio; capital adequacy ratio; technical reserve
ratio; current ratio; liquidity ratio; and return on equity and return on assets ratios. Finally,
performance points are calculated by assigning equal weights to each criterion.
In the current study, first of all, a detailed literature and the related studies in the
literature are presented. Later, the recent data regarding the insurance sector both in
Turkey and the world are provided. The second part focuses on the aim of the study and
the research methods as well as the financial ratios used in the study. In the third part, the
findings are presented together with the results and the conclusion sections.
The findings of the study revealed that the most profitable fiscal year for nonlife
insurance sector was 2007 and the least successful one 2008. Similarly, the most
profitable year for life/retirement insurance companies was found to be 2007 and the most
unsuccessful one 2009. As the data shows, the most profitable years are the same for both
sectors; however, the most unsuccessful years differ. At year level, the order with regards
to being most profitable to the less for non-life insurance sector is as follows: 2007, 2009,
2010 and 2011 respectively. The most unsuccessful year was 2008. As for life/retirement
insurance companies the order is as follows with regards to profitability: 2007, 2008,
2011 and 2010 respectively – 2007 being the most profitable year. The least successful
year was 2009. It is possible to say that global economic crisis in 2008 affected the sector
negatively.
In conclusion, 2008 economic crisis negatively affected insurance sector like
other sectors as well. As a result, the premium production in 2008 and 2009 was very low
compared to other years. As for Turkey, it is observed that non-life insurance premium
production increase has been lower than the inflation rate for the last two years and sector premium production has shrunk accordingly. It is observed that global economic crisis
affected non-life insurance sector more negatively.

Anahtar Kelimeler

Insurance, Insurance Sector, Performance Evaluation, TOPSIS Management, Actuary

TÜRKİYE'DE HAYAT DIŞI VE HAYAT / EMEKLİLİK SİGORTA SEKTÖRÜNÜN FİNANSAL PERFORMANS ANALİZ VE DEĞERLENDİRİLMESİ

Öz

Sigorta riskten korunmayı sağlayan araçlardan biridir. Sigorta Sektörünün bireyler, şirketler ve kurumların karşılaştıkları farklı riskler etkili bir şekilde yönetilmesini sağlaması gibi birtakım önemli işlevleri bulunmaktadır. Sigorta Sektörü, ülke kalkınmasına doğrudan destek sağlayan önemli bir finans sektörüdür. Bu çalışmanın amacı Türkiye'de hayat dışı sigorta şirketlerinin ve hayat\emeklilik şirketlerinin sektörel bazda 2007-2011 yıllarındaki finansal performansı çok kriterli karar verme yöntemi olan TOPSIS (Technique for Order Preference by Similarity to Ideal Solutions) yöntemiyle değerlendirmektir. Analizde sektöre ait 10 adet finansal performans oranı ile bu kriterlere eşit ağırlıklar verilerek performans puanları elde edilmiştir. Çalışmanın sonucunda hayat dışı sigorta sektörün en başarılı yılı 2007, en başarısız yıl ise 2008 yılı olduğu ortaya çıkmış olup, hayat\emeklilik şirketlerinin en başarılı yılı ise 2007 iken, en başarısız yılın 2009 yılı olduğu ortaya çıkmıştır.

Anahtar Kelimeler

Sigorta, Sigorta Sektörü, Performans Değerlendirme, TOPSIS Yöntemi, Aktüerya