‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬

The effect of reinsurance operations

on the financial performance of non-
life insurance companies in the
Egyptian market -A quantitative
study
Dr. Mohamed Mohamed Elsayed Hafez

Lecture at Mathematics and Insurance

department,
Faculty of commerce, Beni-suef University
Email: [email protected]

‫أثر عمميات اعادة التأمين عمى االداء المالي‬

‫لشركات التأمينات العامة المصرية – دراسة كمية‬
‫ محمد محمد السيد حافظ‬/ ‫د‬
‫مدرس بقسم الرياضة والتأمين‬
‫كمية التجارة – جامعة بني سويف‬

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
‫‪The effect of reinsurance operations on the financial performance‬‬
‫‪of non-life insurance companies in the Egyptian market -A‬‬
‫‪quantitative study‬‬

‫‪ABSTRACT‬‬
‫‪The aim of this study is to determine the effect of reinsurance operations on the financial‬‬
‫‪performance(ROA and ROE) of non- life insurance company in Egypt under the control‬‬
‫‪variables by using the data of 9 non- life insurance company during the period from 2008‬‬
‫‪until 2016,reinsurance operation include (insurance and reinsurance debts ,the ratio of‬‬
‫‪reinsurance, local reinsurance premium ceded to local reinsurance, foreign reinsurer‬‬
‫‪premium ceded to foreign reinsurer , local claim coming from local reinsurer, foreign‬‬
‫‪claim coming from foreign reinsurer ,the ratio of retention, the ratio of commotion, the‬‬
‫‪ratio of insurance dependence) and control variables include ( market share, size of the‬‬
‫‪company age of the company and financial leverage ) by using penal data to determine‬‬
‫‪the best model to predict the effect of reinsurance arrangement operations on financial‬‬
‫‪performance .the study found significant and negative relationship between financial‬‬
‫‪performance( ROA) insurance and reinsurance debt ,foreign reinsurer premium, the ratio‬‬
‫‪of reinsurance, the ratio of retention ,size and financial leverage by the fixed effect model‬‬
‫‪,and significant and positive relationship between size and ROE ,and significant and‬‬
‫‪negative relationship between age and ROE ,by the random effect model.‬‬
‫‪Key words‬‬
‫‪Reinsurance - Financial Performance –insurance company specific –control‬‬
‫‪variables- -panel data.‬‬
‫أثر عمليات اعادة التأمين على االداء المالى لشركات التأمينات العامة المصرية – دراسة كمية‬
‫ملخص‬
‫‪ ROA‬تهدف هذه الدراسة الى تحديد أثر عمليات اعادة التأمين على االداء المالى (باستخدام معدل العائد على االصول‬
‫) لشركات التأمينات العامة المصرية باستخدام عدد من المتغيرات التفسيرية و ‪ROE‬ومعدل العائد على حقوق الملكية‬
‫الرقابية وذلك لعدد ‪ 9‬شركات خالل الفترة من ‪ 8002‬الى ‪,8002‬وتشمل المتغيرات التفسيرية (عمليات اعادة التأمين ) كال‬
‫من (مدينو عمليات التأمين واعادة التأمين و نسبة اعادة التأمين ونسبة عمليات اعادة التأمين المحلية الى اجمالى االقساط‬
‫ونسبة اقساط اعادة التأمين االجنبية الى اجمالى االقساط ونسبة التعويضات من عمليات اعادة التأمين المحلية ونسبة‬
‫التعويضات من عمليات اعادة التأمين االجنبية وحد االحتفاظ ونسبة عموالت اعادة التأمين ودرجة االعتماد على اعادة‬
‫التأمين )وتشمل المتغيرات الرقابية على (الحصة السوقية وحجم الشركة وعمر الشركة والرافعة المالية) وتم استخدام نماذج‬
‫السالسل الزمنية المقطعية لتحديد افضل نموذج للتنبؤ بأثر عمليات اعادة التأمين والمتغيرات الرقابية على االداء المالى ‪ ,‬وقد‬
‫)ومدينو ‪ROA‬توصلت الدراسة الى وجو د عالقة معنوية وعكسية بين االداء المالى (باستخدام معدل العائد على االصول‬
‫عمليات اعادة التأمين واقساط اعادة التأمين االجنبية ونسبة اعادة التأمين ‪,‬حد االحتفاظ‪,‬وحجم الشركة والرافعة المالية وذلك‬
‫باستخدام نموذج التأثيرات الثابتة ‪,‬وتوصلت الدراسة الى و جود عالقة ايجابية ومعنوية بين حجم الشركة ومعدل العائد على‬
‫وكذلك وجود عالقة عكسية ومعنوية بين عمر الشركة ومعدل العائد على حقوق الملكية (‪ (ROE‬حقوق الملكية (‬
‫باستخدام نموذج التأثيرات العشوائية‪(ROE.‬‬
‫الكلمات الدالة‬
‫اعادة التأمين –االداء المالى –خصائص الشركة – المتغيرات الرقابية – السالسل الزمنية المقطعية ‪.‬‬

‫‪64‬‬
‫العدد الثاني – ‪9102‬‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬

1-Introduction

This study is related to the reinsurance done by domestic non-life

insurance companies which are currently active in Egypt, the
insurance company facing risks that may be affect on its financial
performance and reducing the profit of policy holders ,one of this risks
are the reinsurance operations, and this study sought to investigate the
relationship between reinsurance operations and the financial
performance of the insurance company in Egypt, and the impact of
reinsurance on the profitability of insurance companies are discussed
in this study.
Insurance companies are aware of the impact of reinsurance on their
financial performance, but the insurance industry as a whole is
inattentive of the impact of such practice on it. The companies in the
insurance industry need to determining the fact of whether the
industry has the benefit of improved profits by using reinsurance or
undergoing from it negative characteristics. Insurance industry is
extremely important for the survival of all industries; any trouble that
could lead to financial distress and losses of insurance industry is very
detrimental for the whole economy(Iqbal and Rehman,2014).
Reinsurance is expensive to the insurer, when insurer transfer risks to
reinsurance company ,they reduce the volatility the ratio of loss ,
reducing underwriting risk, reduces its cash-flows volatility and
financial leverage, and increase the capital of the company, Therefore,
reinsurance reduces the risk of bankruptcy and improves the financial
stability of the insurer. so we can Consider the reinsurance process as
a risk management, and a decision on the company‟s capital structure
(Burcă and Bătrînca,2014).

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
The insurance sector has a privileged place inside the finance sector
because the insurance sector facilitates the way society's risks are
transferred and dispersed, while also playing an active role in capital
and money markets through the funds it channels into securities. With
the added value and labor it thus creates, the insurance sector is
capable of influencing the entire economy (Koc, 2016).
Profit plays an essential role in persuading policyholders and
shareholders to supply funds into insurance firms. Thus, one of the
objectives of management of insurance companies is to attain profit as
an underlying requirement for conducting any insurance business
(KRAMARIC et.al, 2017).
Insurance in developing economics is growing in importance because
its increasing share in financial sector productivity and profitability‟s
firm is sensitivity to changes in reinsurance utilization (Chen and
Hamwi, 2000).
A primary insurer is defined as an insurance company that sells to the
public. A professional reinsurer, on the other hand, is an insurance
company that does not have any direct premium written and sells
insurance only to other insurance companies (Chen and Hamwi,
2000).
IFRS 17, defines a reinsurance contract as: “An insurance contract
issued by one entity (the reinsurer) to compensate another entity for
claims arising from one or more insurance contracts issued by that
other entity (underlying contracts).”
We must state the difference between reinsurance held and
reinsurance assumed, Reinsurance held (or ceded): looks at
reinsurance contracts from the perspective of the direct insurer that
has purchased reinsurance cover for the risks of the insurance
contracts it has issued, Reinsurance assumed: looks at reinsurance
contracts from the perspective of the reinsurer. The reinsurer has
issued reinsurance contracts and assumes the risk that these bring.
There are two principal categories of reinsurance:

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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
(a) Proportional reinsurance: where the reinsurer agrees to cover a
proportionate share of the risks ceded; and
(b) Non-proportional reinsurance: where particular risks (on a risk by
risk basis or in aggregate) are covered by the reinsurer (EFRAG,
2018).
Reinsurance is an important transaction for primary insurers; it can be
used to increase insurer capital and earnings and to reduce regulatory
costs. However, if a reinsurer becomes insolvent, due to some firm-
specific cause or some external force, it can have severe adverse
effects for a variety of stakeholders. For example, if a reinsurer is
unable to pay for losses, the ceding company is then responsible for
the losses, this can lead to one or more of the following: (1) decreased
capacity and financial strength of the ceding company; (2) financial
distress and/or increased costs of capital for insured that may be
without coverage; (3) a strain on remaining insurers if guaranty fund
assessments are required to pay the claims of insolvent primary
insurance companies; and/or (4) overall increased insurance costs and
costs of capital related to further reductions or strains in the insurance
markets(Cole and McCullough,2006).
When insurance company purchasing reinsurance it‟s seek to improve
their financial performance, security and stability over time , five
primary functions of reinsurance from the insurer‟s point of view, the
first when insurance company underwire the risks reinsurance provide
flexibility for insurers in the size and types of risk, the second
reinsurers supply assistance to insurers in specialized areas where the
insurer may have little or no expertise, the third Reinsurance programs
will assist insurers by limiting wide fluctuations in underwriting
results, the fourth increasing an insurer‟s capitalization, by assistant in
insurer‟s operation , the fifth provide protection against the potential
large, accumulations that can result from catastrophic events e.g.
earthquakes, bushfires and cyclones.
Insurance in Egypt is one of the most important non-banking financial
activities, It is the main contributors to the GDP, as it is integrally
linked to the rest of the economic sectors and contributes to risks‟

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
management to which the economic assets may be exposed. In this
respect, insurance is considered one of the most important tools for the
stability and continuity of the rest of non-banking financial sectors,
During 2018, growth rate of insurance premiums was 23.4%
compared to last year. The number of companies operating in this
sector is 37 companies. The total premiums amounted to 30 billion
EGP on 30/6/2018 compared to 2017 where the total premiums
amounted to 24 billion EGP. On the other hand, companies paid total
compensations of 15.4 billion EGP in 2018 compared to 12.9 billion
EGP in 2017(financial regularity authority, 2018).
Despite the decline in insurance companies‟ surplus by 23% to reach
3.7 billion EGP compared to last year where the surplus-reached 4.7
billion EGP, results of the companies‟ activities have improved over
the past four years. As in this period insurance surplus amounted to
3.6 billion EGP during 2018 compared to 2 billion EGP in 2014,
which has had the effect of attracting more new investments in the
insurance market through establishing new companies, On 30 June
2018, net investments of insurance companies amounted to 99.4
billion EGP on a growth rate of 16% compared to net investments last
year of 86 billion EGP(Egypt Financial Supervisory Authority
(EFSA), 2018).
While the total rights of policyholders - which represent the liabilities
of the insurance companies towards their clients - was 61 billion EGP
during 2018 compared to 54 billion EGP during 2017 with a growth
rate of 12%,On the other hand, shareholders 'equity in insurance
companies amounted to 38 billion EGP in 2018 with a growth rate of
23.3% compared to shareholders' equity of 31 billion EGP in
2017(Egypt Financial Supervisory Authority (EFSA), 2018).
For reinsurance company in Egypt from 2007 there is not found local
reinsurance company, before 2007 the Egyptian reinsurance company
was the only local company specialist in reinsurance in Egypt and the
insurance company ceded a ratio of premiums mandatory to this
company, which was reduced the premium ceded to the foreign
reinsurance company, and the insurance company must depending on

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
foreign reinsurance company on its reinsurance arrangement, and in
this case may affect the financial performance of insurance company.
For the past several years, the global reinsurance sector has weathered
unfavorable and continuously changing business conditions; the
challenges have included a prolonged soft reinsurance pricing cycle,
heightened competition, limited organic growth opportunities, a
record Influx of alternative capital, low interest rates, mergers and
acquisitions, and large catastrophe losses in 2017. Against this
backdrop, reinsurers are trying to pull whatever levers they can to not
only remain relevant but sustain profitability(S&P GLOBAL
RATING ,2018),
For the pervious reasons this study attempt to determine the effect of
reinsurance operations on the financial performance of non- life
insurance company in Egypt during the period from 2008 to 2016 to
determine the probability effects on insurance company and how to
keep on its profitability to achieve high return to policyholders and
shareholders.
The aim of this study is to determine the effect of reinsurance
operations on the financial performance of non- life insurance
company in Egypt under the control variables by using the data of 9
non- life insurance company during the period from 2008 until 2016
by using panel data to determine the best model to predict the effect of
reinsurance arrangement operations on financial performance.
The contribution of this study is to collect the ratios of reinsurance
operation and the control variables that may be affect the financial
performance which we calculate by using two measures ROA and
ROE and determine which of two measures may be affected by
reinsurance operations to recommended the insurance company for
which of ratios may affect the financial performance on Egyptian
insurance company.
2-Literature Review
Insurance play vital role in the economy of any country from its role
in risk management on behalf of individual ,and risk transferring of

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
Projects and people to insurance company , the goal of the insurance
company is to increase profit to shareholders and policyholders, and
this profit may be affected by a lot of variables from it the reinsurance
operations which can affect the financial performance of insurance
company ,financial performance of insurance company It has been
studied in many previous studies, some researches measure the
financial performance of insurance company by ROA or ROE or both
the two measures such as, Wani and Dar (2014), SAMBASIVAM and
AYELE(2013), Boadi et al.,(2013), Malik(2011), Reshid(2015),
OBONYO(2016), Mwangi and Murigu(2015), Datu(2015), Lee and
Lee(2012), Koc(2016), Lire and Tegegn (2016), Mazviona
et.al(2017), SISAY(2017),all this studies using ROA (profit before
taxes / total assets )and ROE (profit before taxes /total equity) as a
measure of profitability or financial performance .
Adebowale and Adebayo (2018) study the effect of reinsurance
utilization (measuring by the ratio of premium ceded to reinsurer and
reinsurance dependence )on financial (using ROA and ROE)and non-
financial performance (using questionnaire),by using log
transformation regression to measure the effect on financial
performance ,and content analysis to measure the effect on non-
financial analysis ,the study found a significant relationship between
reinsurance utilization and performance of non-life insurance
companies in Nigeria , the study also stated the importance of non-
financial performance indicators like customers satisfaction, claims
management procedures, time lag .
Bressan (2018) study the effect of reinsurance on solvency,
profitability, and taxes of insurers for a sample of insurers in the
united states during the period from2005-2017 for five types of
insurance company include composite insurance ,health insurance, life
insurance, title insurance, and non-life insurance, to determine the
effect of reinsurance(the ratio of reinsurers‟ share of technical
provisions over total assets) on solvency (CAPITAL is the sum of
equity capital and surplus divided by total assets. CAPITAL2 is the
sum of equity capital and surplus divided by total earned premiums),

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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
profitability(ROA ,and ROE), taxes(the difference between pre-tax
profit and profit net of taxes, divided by pre-tax profits) the study
concluded that Reinsurance and capital can be considered alternatives
to improvement Solvency.
Aduloju And Ajemunigbohun (2017) investigate the relationship
between reinsurance and underwriting profit, gross premium income,
and financial stability (ROA and ROE ) of insurance companies in
Nigeria, The Ratio of Ceded Reinsurance , and Reinsurance
Recoverables to Policyholder‟s Surplus are the usual measures of
reinsurance utilization, surplus refers to equity Capital, while
„recoverables‟ represent funds owed by reinsurers to insurance
companies, by using questionnaire, they found a significantly positive
relationship between
Reinsurance capacity and gross written premium , a significantly
positive relationship between reinsurance capacity and profitability of
insurance companies ,and a significant relationship between
reinsurance capacity and financial stability of insurance companies in
Nigeria.
Kramaric et.al (2017) analyses the influence of insurance company-
specific, insurance industry-specific and macroeconomic variables on
performance of insurance markets in selected Central and Eastern
European countries by using two performance variables ,return on
assets (ROA) and return on equity (ROE),and the explanatory
variables Included size(measured on the basis of gross written
premium),type , share of premium ceded to reinsurance, combined
ratio, ownership variable indicating foreign or domestic ownership,
age, organizational form dummy variable referring to joint stock
companies or mutual and real GDP per capita growth, by using panel
models there are age is positively effect and significance with
performance measured with both ROA, and ROA, and a real GDP per
capita growth is significant influence on performance of ROA.
Koc , (2016) sought to determine the factors that affect the financial
performance of insurance company in Istanbul , by using panel data he
found there are a positive relationship between numbers of agents,

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
technical profit/earned premiums ratio , financial assets investment
profit and financial performance, and a negative relationship between
loss ratio and financial performance.
Obonyo, (2016) studded the effect of reinsurance on financial
performance for general insurance in Kenya by using ratios such as
net premiums, claim ratios and underwriting profitability to determine
the relationship between reinsurance arrangement and financial
performance of general insurance company the result was there are a
positive but insignificant relationship between reinsurance and
financial performance, Net commissions earned had a positive effect
on underwriting profit ratio, and the study recommended that
insurance companies should effectively manage their claim costs and
underwriting quality in order to increase their underwriting profits.
Mankaı¨ and Belgacem(2015) determine the interaction between risk
taking ,capital, and reinsurance for property–liability insurance firms
,the study found that the adjustments between risk and capital are
positive. And this result, found only in one direction, and reinsurance
is negatively associated with capital.
Mwangi and Murigu (2015)study the factors that can impact the
financial performance of general insurance in Kenya, by using
explanatory variables included (leverage, liquidity, size of the firm,
the age of a company, underwriting risk, Retention ratio, Management
Competence index ,the ownership) and ROA as a dependent variable
,using multiple linear regression financial performance is significance
with leverage, equity capital, size, management competence, and
Financial performance was not significantly with retention ratio,
underwriting risk,.
Others studies measure the financial performance by ROA and ROE
,Iqbal and Rehman(2014) analyze the relationship between
reinsurance and profitability for domestic non –life insurance
company in Pakistan ,the study use the ratios (ROA,ROE) as indicator
to profitability, and use reinsurance utilization and reinsurance
dependence as indicator for reinsurance ,the result of the study is there
are a significant influence for the reinsurance utilization on

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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
profitability ,and there is no significant influence for reinsurance
dependence on profitability of non –life insurance company in
Pakistan.
Burcă and Bătrînca(2014) analyze the determinants of the demand
for reinsurance in the Romanian insurance market ,the study
determine some indicators such as the return on total assets ratio,
company size, age of the company, financial leverage, growth of gross
written premiums, underwriting risk, solvency margin, taxes and
group affiliation, the amount of reinsurance purchased, and
Diversification, the study concluded that the determinants of the
demand for reinsurance in the Romanian insurance market are the
return on total assets ratio, company size, number of years since the
company operates in the Romanian insurance market and the financial
leverage in insurance.
Park and Xie (2014) determine the systematic risks that may be
caused the US property–casualty insurance company resulting from
the correlation between reinsurance companies and US insurers (P /
C), and found that the likelihood of lowering the initial insurance
company increases with its exposure to the default reinsurance risk
from the reinsurance companies that have been downgraded.
Cummins et.al(2012) study the determinants of reinsurance
counterparty relationships ,and the linkage between these relationships
and insurer financial performance, in the U.S. property-liability (P-L)
insurance industry,using regression analysis ,with reinsurance
counterparty relationship as dependent variable by using three
measures (utilization, exposure, degree of concentration) , and firm
characteristics as independent variables, and measure the impact of
reinsurance counterparty relationships on primary insurer financial
performance(ROA and ROE), and frontier efficiency analysis to
estimate cost, revenue, and profit efficiency)and measure efficiency
utilizing data envelopment analysis (DEA),there are a negative
relationship between firm size and reinsurance
Utilization, insurers that write a higher portion of business in riskier
lines will purchase more reinsurance, a positive relationship between

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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
firm size and reinsurance concentration, reinsurance utilization is
positively related to all types of efficiency, ROE, and ROE, whether
utilization is measured by premiums ceded or recoverables.
Cummins et.al(2008) estimate the effect of reinsurance on insurers‟
costs, and estimate a parametric cost function to predict of the effect
of reinsurance on insurers‟ underwriting risk, The empirical results
state that reinsurance increases significantly the costs of producing
insurance services and reduces significantly the volatility of the loss
ratio, and insurers purchasing reinsurance to reduce their
underwriting risk.
Chen and Hamwi, (2000) sought to analyze the comparison between
performance of primary insurance and professional reinsurance to see
whether there is any significant difference in performance between
primary insurers and professional reinsurers, (for example, in the
combined ratio that measures underwriting profitability, or in the yield
on invested assets, or in the change in policyholders‟ surplus that
affects policyholders‟ security),the study using least square regression
analyses found that reinsurers have a higher degree of redundancy in
their loss reserves than primary insurers who underwrite a higher
volume of business relative to their policyholders‟ surplus.
3-Determinates the effect of reinsurance on the financial
performance of insurance company
3.1-depentent variables
Two common measures were used by prior studies to measure the
financial performance of insurance company which are ROA and
ROE. Following prior studies, SAMBASIVAM and AYELE(2013),
Boadi et al.,(2013), Malik(2011), Reshid(2015), OBONYO(2016),
Mwangi and Murigu(2015), Datu(2015), Lee and Lee(2012),
Koc(2016), Lire and Tegegn(2016), Mazviona et.al(2017),
SISAY(2017) this study uses ROA and ROE as proxies of insurance
companies s' financial performance ROA is used to evaluate insurance
company's ability to generate returns from available sources of funds.
It has been calculated as the ratio of net profit before taxes for a year

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
to the total assets of the same year. Additionally, ROE is used to
analyze the return generated by the funds that shareholders have
invested. It has been calculated as the ratio of net profit before taxes
for a year to the total equity of the same year.
3.2- Independent variables
Two categories of independent variables were used in this study as
shown in Figure. Insurance and reinsurance‐specific (independent)
variables were considered as internal factors, which include the ratio
of insurance and reinsurance company to equity ,the ratio of
reinsurance , the ratio of local reinsurance ,the ratio of foreign
reinsurance ,the ratio of local claim reinsurance to local reinsurance
premiums, the ratio of foreign claim reinsurance to foreign
reinsurance premiums, the ratio of retention , the commotion of ceding
reinsurance, the reinsurance dependence , Another category of
independent variables is control variables which affect the financial
performance of insurance companies ,which include market share, size
of company, age of the company, the leverage Following is an
explanation of both Categories of independent variables.
3.2.1- Insurance and reinsurance‐specific
1- The ratio of insurance and reinsurance company to equity
(IRCE) (insurance and Reinsurance Company to equity)Which means
The company's debt with others insurance and reinsurance
companies, and this ratio determine the value of this debts to the
equity and how can it affect the performance of company which may
be positive or negative effect on the financial performance of
insurance companies.
2- The ratio of reinsurance(RE) ( the total premium ceded to
reinsurance company to the total premium) this ratio determine the
percent of premium that ceded to reinsurance company and reflect
the depends of insurance company on reinsurance, and there must
not more than 50% of total premium ,and if this ratio more than
this percent , mean that the insurance company don‟t participate
insurance and collect money only.

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
3- The ratio of local reinsurance(LRE) ( the total of local premium
ceded to local reinsurance company to the total premium) ,this ratio
represent the percent of local premium that ceded to local reinsurance
company ,and this ratio mean the percent of premium that go to local
reinsurance company ,some Countries‟ Legislation(e.g. Egypt before
2007) state that there must be a percent of local premium ceded to
local reinsurance company ,and the object of this Legislation reduced
the percent of premium that go out the country.
4- The ratio of foreign reinsurance(FRE) ( the total of foreign
premium ceded to foreign reinsurance company to the total
premium), this ratio represent the percent of foreign premium that
ceded to foreign reinsurance company ,and this ratio mean the percent
of premium that go to foreign reinsurance company, this ratio
determine the degree of dependence of local company on reinsurance
,and if this percent is more than 50% that means high dependence of
local company on reinsurance ,to receive the commission of
reinsurance ,and local insurance company take the role of mediator
only.
5- The ratio of local claim reinsurance(LCRE) (local claim
reinsurance in a year to local premium in the same year) and
According to this ratio the insurance company determine the result of
local reinsurance treaties, and decide which of this treaties must be
continue and which deleted.
6- The ratio of foreign claim reinsurance(LFRE) (foreign claim
reinsurance in a year to foreign premium in the same year) and
According to this ratio the insurance company determine the result of
foreign reinsurance treaties, and decide which of this treaties must be
continue and which deleted, and the insurance company must compere
between this ratio with the pervious ratio to determine if company can
depends on local or foreign reinsurance treaties.
7- The ratio of retention(RET) (the net underwriting premium in the
year to the total underwriting premium in the same year) ,this ratio
determine the percent of premium that company can be keep it and
this ratio must be more than 50% and if it not, the company are more

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
depending on reinsurance to collect premium and receive only
commission from reinsurance company , and this ratio affected by
many variables that out of this study.
8- The commotion of ceding reinsurance(CRE),(the value of
commission from reinsurance company to the premium that ceded to
the reinsurance company ) and this commission represent a revenue to
the insurance company that reinsurance company pay to the company
in opposite the premiums which are ceded to it, when this ratio
increase it means more revenue to the insurance company.
9-The Rinsurance dependence (REDEP)(The value of total ceded
premium to total assets),this ratio investigate to what the insurance
company depended on reinsurance company when underwrite in risks
3.2.2- control variables
1-Market share(MS) (the percent of total premium of the company
to total premium of the all companies in the market) this ratio
determine the share of the company in the market ,and its effect on the
financial performance of the insurance company.
2- size of company(SIZE) (natural logarithm of total assets
[LNAS])this ratio reflect the contribution of assets in the revenue of
the company , and its effect on the financial performance of the
insurance company.
3- Age of the company (AGE) (the number of years from the
company started),this variable reflect the experience of the company
which affect the financial performance of insurance company.
4-Financial Leverage (LEV)(total liabilities to total assets) this ratio
reflect the percent of all liabilities on the insurance company to its
assets ,we can say that when this ratio is increase there is negative
affect on the financial performance ,and verse -verse.
4 . Data And Methodology`
In this section, data sources and sample selection are provided.
Then, the methodology and used models are discussed.

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
4.1 - Data collection and sampling
The dataset for the Insurance and reinsurance‐specific variables used
by this study is fetched from Egypt Financial Supervisory Authority
(EFSA) STATSITCAL BOOK (2008-2016), which supplies all
information regarding all Insurance company working in Egypt. Thus,
it is considered the most common and authenticated database for
Insurance company system information, The database provides annual
information for all insurance company working in Egypt which
include one public company , 10 life insurance ,4 life Takaful
insurance,13 private non-life insurance,5 non-life Takaful insurance ,
table (1) and figure (1) explore the value of direct premium,
reinsurance premium coming, total premium, reinsurance premium
forward, net premium, the percentage or reinsurance premium to
direct premium, and the percentage of reinsurance premium forward
to direct premium for all non- life insurance company in Egypt during
(2008/2009-2016/2017).

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
TABLE 1 results of non-life insurance company in Egypt
Reinsurance Reinsurance
Reinsurance Reinsurance
Direct premium – Total premium – Net
premium – premium –
year premium COMING/ premium FORWARD premium
COMING FORWARD
L.E Direct L.E / Direct L.E
L.E L.E
premium % premium %
2008/2009 4750238 358077 7.538085 5108315 2463618 51.86304 2644697
2009/2010 5173824 477897 9.236824 5651721 2546739 49.22353 3104982
2010/2011 5655426 474070 8.382569 6129496 2747803 48.58702 3381693
2011/2012 6088898 444421 7.298874 6533319 3193686 52.45097 3339633
2012/2013 6953525 568853 8.180786 7522378 3946003 56.74824 3576375
2013/2014 7546710 653899 8.66469 8200609 3969704 52.60178 4230905
2014/2015 8117980 756340 9.31685 8874320 3978346 49.0066 4895973
2015/2016 9009391 882661 9.797122 9892052 4257950 47.26124 5634102
2016/2017 12328621 1450121 11.76223 13778742 5845459 47.41373 7933283
Source: (Egypt Financial Supervisory Authority (EFSA)-statistical books (2008-2016)

Note: total premium=direct premium + reinsurance premium coming ,net premium= (direct
premium +reinsurance premium coming) – reinsurance premium forward.
FIGUAR 1

results of non-life insurance company in

Egypt
15000000

10000000

5000000

Direct premium L.E Reinsurance premium –COMING L.E

Total premium L.E Reinsurance premium –FORWARD
Net premium L.E

Figure 2 investigate the comparison between premium of reinsurance

coming and forward to direct premium which explore the increasing
of percentage of reinsurance premium forward to direct premium and

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
that mean non-life insurance company are high depended on
reinsurance foreign and we need to investigate the relationship
between reinsurance and financial performance of non-life insurance
company.

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
FIGUAR 2
60
50
40
30 Reinsurance premium –
COMING/ Direct premium %
20
Reinsurance premium –
10
FORWARD / Direct premium %
0

Source: depended on data in table 1

this study focus only on non-life insurance company, which include
18 company , the sample include 9 company which its data are
available during the period of the study(2008/2009-2016/2017), The
nine (9) companies were selected based upon the availability of data
and the number of years that an insurer has been in operation ,The
sample of this study is using panel data that consists of 9 insurance
company with 81 observations for a period of 9 years from 2008/2009
to 2016/2017, Importantly, the study includes all public‐sector
insurance company that include one company ,and 3 local private
company ,5 foreign private company , The criteria for selection of
these company are depending on the availability of data for the period
covered by this study, further in EGYPT before 2007 there are only
one local reinsurance company (Egyptian Reinsurance Company)
which started working from 1958 ,and was deleted in 2007 ,and this
decision affect the insurance company ,where the law was determine a
percentage legally that insurance company must be ceded to Egyptian
Reinsurance Company , which the objective of this law is decreasing
the reinsurance premium which are going to foreign reinsurance
company ,and keeping a part of premium in Egypt that may be going
to foreign reinsurance , This makes the investigation of insurance
company financial performance during this period is interesting and
very useful for shareholders and policyholders.

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
Regarding comparing the sample used in this study with samples from
previous studies, most studies conducted on the financial performance
or profitability of an insurance company in different countries have
used panel data. For example, Koc (2016) sampled five insurance
companies on the Istanbul Stock Exchange between 1993 and 2005,,
Datu(2015) studied the association between Insurer-specific
indicators and macroeconomics on profitability in Philippine non-life
insurance market in the period between 2008-2012, SISAY(2017)
study the effect of financial risk on the performance of insurance
companies in Ethiopia for eight insurance companies covering the
period of sixteen years in the period between 2000-2015, In the same
context, Shahid et.al(2017),determine the factors that effect on the
profitability of five life insurance company in Pakistan in the period
between2008-2105 , Lire and Tegegn (2016),analyze the factors
which impact the profitability of private insurance in Ethiopia in the
period between 2005-2015, Ortyński(2016),determine the main
factors of financial performance of non-life insurance company in
Poland in the period between2006-2013,Çekrezi(2016),investigated
the factors that affected on financial performance of five insurance
company in Albania in the period between 200-2013,
Kaya(2015),determine the specific factor of insurance company that
effect on profitability for 24 non- life insurance company in turkey in
the period between 2006-2013, Wani and Dar (2015),measured the
relationships between financial risks and financial performance for life
insurance company working in India, Burcă and Bătrînca
(2014),studied the factors of financial performance of insurance
company in Romani in the period between 2008-2012.
4.2 | Model specification and econometric tools
Prior literature on the effect of reinsurance operations on the financial
performance of insurance company revealed that a linear regression
models are the suitable form of analysis (pooled, fixed, and random
effect models, e.g., Iqbal and Rehman (2014) ; Burcă and
Bătrînca(2014) ; Datu(2015) ; Lee and Lee(2012); SISAY(2017);
Shahid et.al(2017); Lire and Tegegn (2016); Ortyński(2016);
Kaya(2015); ADULOJU and AJEMUNIGBOHUN (2017);

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
TOMISLAVA et.al (2017),either used a regression analysis ;e.g,
Adebowale and Adebowale and Adebayo (2018); Mwangi and
Murigu(2015); OBONYO (2016); SAMBASIVAM and
AYELE(2013); Malik(2011); Reshid(2015), Wani and Dar (2015);
Boadi et.al (2013); Bressan(2018),or both regression analysis and
data envelopment analysis (DEA), Cummins and Weiss (2012),
This study used linear regression models with a combined, constant
and random effect, and examined all the assumptions required to
perform a linear regression. Using linear regression for three models
can help to obtain more consistent and comparable estimates for
parameter models. As such, panel data analysis is used instead of the
proposed new GMM. The researchers emphasized the main
advantages of adopting the analysis of panel data. The first is its
efficiency of econometric estimates on pure or pure time-series data
analysis techniques (Baltagi, 2005; Hsiao, 2003), and the second is its
ability to control individual and dangerous multi-line heterogeneity
(Kyereboah-Coleman, 2007),the third advantage is it can study
dynamic relationships, and model the differences or heterogeneity
between subjects(Frees,2004), Panel data of 9 years for 9 Egyptian
non- life insurance company is used to analyze the Affecting by
insurance company ‐specific and control variables on non-life
insurance financial performance , Following Burcă and
Bătrînca(2014), Iqbal and Rehman (2014), Adebowale and Adebayo
(2018), Aduloju And Ajemunigbohun (2017), Tomislava et.al
(2017), OBONYO ,( 2016) , the essential structure and context of the
panel data is defined as per the following regression model
ynt = α+βxnt + εnt, (1)
where γnt denotes the dependent variable financial performance , α is
the intercept term on the explanatory variables, β is a k × 1 vector of
parameter to be estimated, and vector of observations is xnt, which is 1
× k, t = 1 …, T; n = 1, …, N. the practical and operational form, the
aforementioned model can be expressed as follows:
financial performance = ʄ (insurance company− specific variables;
control variables) (2)

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
financial performance is measured by ROA and ROE. Insurance
company- specific variables include, The ratio of insurance and
reinsurance company to equity, The ratio of reinsurance, The ratio of
local reinsurance ,The ratio of foreign reinsurance ,The ratio of local
claim reinsurance ,The ratio of foreign claim reinsurance ,The ratio of
retention ,The commotion of ceding reinsurance ,the reinsurance
dependence control variables include, Market share, size of company,
Age of the company ,Leverage, Expanding the proxies used in Model
2, two models have been developed to investigate the factors that may
affect the insurance company financial performance in EGYPT. The
models hypothesize that the insurance company financial performance
in EGYPT depends on insurance company− specific variables; control
variables that are as follows:

ROAit = αi + β1IRCE+ β2 RE+ β3 LRE+ β4 FRE+ β5 LCRE+ β6

LERE+ β7 RET+ β8 CRE+ β9REDEP + β10 MS+ β11 SIZE+ β12
AGE+ β13 LEV+ εit (3)
ROEit = αi + β1IRCE+ β2 RE+ β3 LRE+ β4 FRE+ β5 LCRE+ β6
LERE+ β7 RET+ β8 CRE+ β9REDEP + β10 MS+ β11 SIZE+ β12
AGE+ β13 LEV+ εit (4)
where i refers to an individual insurance company; t refers to year;
β1:β13 are the coefficients of determinant variables and ε is the error
term; and all other variables are as defined in Table 2.
Both models are estimated using combined, random, and constant
regression. The Hausman test is applied to determine whether
Basiuras and Cosmedo (2007) indicated that it was the value at which
Hausmann tested was greater than the critical square, and the
estimated fixed effects were the appropriate option (Al-Maqtari,
2018).

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
 ‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
TABLE 2 Definitions of insurance company' financial performance
and reinsurance variables
Variable Acronym Measure Exp. Evidence from prior studies
effect
Dependent variables
ROA ROAit = Adebowale
and Adebayo (2018)
financial Bressan (2018)
performance ROE ROEit = ADULOJU and
AJEMUNIGBOHUN (2017)
TOMISLAVA et.al (2017)
OBONYO,(2016)
Mankaı¨and Belgacem(2015)
Independent variables: insurance company‐specific
The ratio of IRCE -
insurance and
reinsurance IRCE=
company to
equity
The ratio of RE RE = - Datu(2015), OBONYO (2016),
reinsurance Mazviona et.al(2017), ADULOJU
and AJEMUNIGBOHUN (2017),
Bressan (2018), Iqbal and
Rehman(2014), KRAMARIC and
PAVIC(2017)
The ratio of local LRE LRE +
reinsurance = -
The ratio of FRE FRE= -
foreign
reinsurance
The ratio of local LCRE LCRE= -
claim reinsurance +
` The ratio of LFRE LFRE= -
claim +
reinsurance
The ratio of RET RET= - OBONYO (2016), ADULOJU
retention and AJEMUNIGBOHUN (2017),
The commotion CRE CRE= + ` Augustine and Lukmon(2017),
of ceding
reinsurance
The reinsurance REDEP REDEP= + Reshid,(2015), Adebowale and
dependence Adebayo (2018), Tegegn and
Lire(2016)
control variables
Market share MS MS= + Datu(2015)
size of company SIZE size = natural logarithm of total assets + Burcă and Bătrînca(2015) ;

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
 ‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
Datu(2015) ; Lee and Lee(2012);
Reshid,(2015),
Age of the AGE AGE= number of years from the company + Burcă and Bătrînca(2015) ;
company started
Leverage LEV LEV= - Burcă and Bătrînca(2015) ;
KRAMARIC and PAVIC(2017)
5 | Data Analysis And Results
5.1 | Descriptive Statistics
Table 3 shows descriptive statistics for insurance company‐specific
and control variables that affect the financial performance of the
insurance company variables over the period from 2008 to 2016, the
minimum value of ROA and ROE are -0.93669 and 3.285376 ,
respectively. The mean values are 5.74 for ROA and 20.5for ROE.
This indicates the positive skew distribution of ROA and ROE during
2008–2016, it is also shown in Table 3 that there is a variation
between the average values and standard deviation of all independent
variables. For insurance company‐specific variables, the average of
the ratio of (IRCE) is 16.54%, the ratio of, RE, LRE, FRE, and LCRE
are 16.55%, 47.67%, 4.35% and 43.32% with standard deviation of
15.45%,12.21%,3.87% and 12.9% respectively.
Further, the average values of the ratio of LCRE, LFRE ,RET ,CRE
and REDEP are137.83%,51.14%,52%,25% and 22.38%with standard
deviation of 405%,16.1%,12.9%,8.5%,and 9.78% respectively. With
consideration of control variable ,the market share (MS) has an
average value of 76.3with a standard deviation of 67, and (Min. =
2.09, Max. = 266.75), the mean value of SIZE is 5.85 % with a
standard deviation of 0.53 , and (Min. = 4.9, Max. = 7.5), the mean
value of AGE is 32.4 with a standard deviation of 15.2, and (Min. =
18, Max. = 67),and the mean value of LEV is 0.64% and a standard
deviation of 0.25, and (Min. = 0.12, Max. = 1.75).
TABLE 3 Descriptive statistics
Mean Median Maximum Minimum Std. Dev.
Panel A: dependent variables
ROA 5.744623 5.456802 14.38832 -0.93669 3.285376
ROE 20.52179 16.9228 198.0156 0.505863 23.23189
Panel B: insurance company‐specific
IRCE 16.54598 13.04864 99.7626 0.486849 15.45333
RE 47.66709 46.31783 78.18883 23.88427 12.21009
LRE 4.347938 2.930795 15.77699 0 3.866886
FRE 43.31915 41.40827 76.26853 16.70029 12.9022
LCRE 137.8372 28.12161 2469.836 0.018149 405.0059
LFRE 51.14016 50.40266 101.7868 0.286624 16.08377

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
 ‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
RET 51.99878 53.682 76.11646 16.12033 12.90324
CRE 24.96375 24.3 69.9 1.5 8.532547
REDEP 22.375 21 52 6 9.781635
Panel C:control variables
MS 76.32071 53.33135 266.7527 2.099577 67.00232
SIZE 5.849937 5.74236 7.508586 4.928555 0.5317
AGE 32.4125 26 67 18 15.23877
LEV 0.640803 0.669889 1.757765 0.118555 0.250127
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);LRE: local reinsurance premium ceded to
local reinsurance(%);FRE: foreign reinsurer premium ceded to foreign reinsurer (%);LCRE: local claim coming from local
reinsurer(%);FCRE: foreign claim coming from foreign reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of
commotion(%);REDEP: the ratio of insurance dependence(%);MS: market share(%);SIZE: natural logarithm of total
assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio of insurance profit before taxes to total assets;
ROE: ratio of insurance profit before taxes to shareholders equity.

5.2 Unit root test

As a prerequisite requirement and the starting point for the
econometric analysis of the models of the study, stationary of the
panel data using a unit root test is conducted. Stationary of the
variables is tested by Levin, Lin, and Chu, Im, Pesaran, and Shin,
Augmented Dickey–Fuller, and PP–Fisher tests. As shown in Table
4,the variable of ROA and ROE stationary at the first difference in all
the applied tests, and the variables RE,LRE,FRE,and redep, found to
be stationary at the first difference in all the applied tests, and
IRCE,LFRE,RET,and CRE, found to be stationary at the second
difference in all the applied tests, further , for control variables MS
and AGE, found to be stationary at the first difference in all the
applied tests, and SIZE, LEV found to be stationary at the second
difference in all the applied tests, This leads to reject the null
hypothesis of a unit root.
TABLE 4 Unit root test
level 1st difference 2 nd difference
Levin, Im, ADF– PP– PP– Im, ADF–
Levin, Im, Pesaran, ADF– Levin,
Lin, Pesaran, Fisher Fisher Fisher Pesaran, Fisher PP–Fisher
Variables Lin, and Shin Fisher Lin,
& Chu and Shin chi‐ chi‐ chi‐ and Shin chi‐ chi‐square
& Chu t* W‐stat chi‐square & Chu t*
t* W‐stat square square square W‐stat square
Panel A: dependent variables
ROA 0.4128 0.7226 0.7065 0.0382 0.0000 0.0001 0.0000 0.0000
ROE 0.0010 0.2156 0.2095 0.0005 0.0009 0.2187 0.1901 0.0000
Panel B: : independent variables
IRCE 0.0000 0.2510 0.1209 0.0524 0.9997 0.1984 0.1676 0.0000 0.1107 0.0433 0.0220 0.0000
RE 0.0003 0.2645 0.2594 0.0763 0.0000 0.0056 0.0041 0.0000
LRE 0.0007 0.4559 0.3889 0.4709 0.0000 0.0663 0.0389 0.0000
FRE 0.0000 0.0000 0.0020 0.0047
LCRE 0.0144 0.0856 0.0258 0.0000 0.0000 0.0000 0.0000 0.0000
LFRE 0.7161 0.6779 0.8152 0.0002 0.0007 0.1086 0.0663 0.0000 0.0000 0.0000 0.0000 0.0000

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
 ‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
RET 0.0004 0.2973 0.2776 0.1138 0.0000 0.0763 0.0477 0.0014 0.0003 0.2305 0.0930 0.0008
CRE
0.6289 0.8331 0.9545 0.3389 0.6094 0.3405 0.3665 0.0000 0.0085 0.1061 0.0549 0.0000
redep 0.0029 0.2264 0.2009 0.0874 0.0000 0.1274 0.0938 0.0000
Panel c: control variables
MS 0.0010 0.3495 0.2845 0.3487 0.0000 0.0977 0.0652 0.0000
SIZE 0.6062 0.9984 0.9971 0.2665 0.4719 0.5063 0.3691 0.0067 0.0000 0.1885 0.1229 0.0000
AGE 0.0010 0.3495 0.2665 0.4719 0.0000 0.0977 0.0652 0.0000
lev 0.0096 0.6531 0.7375 0.1278 0.0033 0.1715 0.0702 0.0000 0.0000 0.0000 0.0124 0.0000
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);LRE: local reinsurance premium ceded to
local reinsurance(%);FRE: foreign reinsurer premium ceded to foreign reinsurer (%);LCRE: local claim coming from local
reinsurer(%);FCRE: foreign claim coming from foreign reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of
commotion(%);REDEP: the ratio of insurance dependence(%);MS: market share(%);SIZE: natural logarithm of total
assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio of insurance profit before taxes to total assets;
ROE: ratio of insurance profit before taxes to shareholders equity
5.3 Pearson correlation
Table 5 shows the correlation matrix and diagnostics of
multicollinearity for the used variables in the study. The results depict
that there is a positive and negative relationship between dependent
and independent variables. With regard to : insurance company‐
specific, there is a positive/negative correlation between insurance
company‐specific and both ROA and ROE, Where
LER,RET,CRE,REDEP have a positive correlation with ROA ,and
IRCE,LCRE,LERE,RET,SIZE,AGE have a positive correlation with
ROE ,where IRCE,RE,LRE,FRE,MS,SIZE,AGE,LEV have a negative
correlation with ROA, and RE,;RE,FRE,CRE,REDEP,MS,LEV have
a negative correlation with ROE.
All independent variables have a low correlation that indicates the
absence of multicollinearity issues in this study.expet LRE and MS
have found the problem of multicollinearity, where The VIF is more
than 10 (113.5, 115.2) respectively, so we excluded the two variable
as shown in table 5, For more reliable analysis, Variance Inflation
Factor (VIF) test is conducted to test multicollinearity issues. As it is
shown in Panel B of Table 5, VIF values do not exceed 6.06 for all
variables(except LRE and MS) that indicate that there is no
multicollinearity between independent variables.
TABLE 5 :Correlation and multicollinearity diagnostics
IRCE RE LRE FRE LCRE LFRE RET CRE REDEP ROA ROE MS SIZE AGE LEV
Panel A: Pearson correlation
IRCE 1
RE -0.118 1

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LRE 0.0476 -0.026 1
FRE -0.126 0.9541 -0.32 1
LCRE 0.1233 -0.046 0.105 -0.0754 1
LFRE 0.2769 -0.449 -0.04 -0.4137 0.0174 1
RET 0.1295 -0.986 0.048 -0.9477 0.0507 0.429 1
CRE 0.1086 -0.057 -0.03 -0.0433 -0.052 0.252 0.0725 1
REDEP -0.15 0.3162 0.214 0.2352 0.0863 -0.06 -0.288 0.024 1
ROA -0.321 -0.115 -0.22 -0.0418 -0.067 0.133 -0.0739 0.254 0.1127 1
ROE 0.0199 -0.265 -0.01 -0.2478 0.0414 0.039 0.2708 -0.205 -0.097 -0.03 1
MS 0.0435 -0.009 0.993 -0.3061 0.0956 -0.04 0.0153 -0.038 0.223 -0.2 -0.03 1
SIZE -0.068 -0.119 -0.16 -0.0637 -0.051 0.129 0.1385 -0.315 -0.363 -0.11 0.339 -0.22 1
AGE 0.122 -0.086 0.019 -0.0865 -0.022 0.263 0.1057 -0.253 -0.271 -0.2 0.198 -0.02 0.83 1
LEV 0.0217 0.3753 -0.03 0.3642 -0.086 -0.12 -0.361 -0.171 0.2816 -0.1 -0.06 -0.04 0.016 0.24 1
Panel B: diagnostics of multicollinearity
VIF 1.2955 3.116 113.5 1.22 1.0758 1.815 2.6974 1.436 1.6011 115.2 6.064 5.72 1.771
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);LRE: local reinsurance premium ceded to
local reinsurance(%);FRE: foreign reinsurer premium ceded to foreign reinsurer (%);LCRE: local claim coming from local
reinsurer(%);FCRE: foreign claim coming from foreign reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of
commotion(%);REDEP: the ratio of insurance dependence(%);MS: market share(%);SIZE: natural logarithm of total
assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio of insurance profit before taxes to total assets;
ROE: ratio of insurance profit before taxes to shareholders equity

5.4 | Results of model estimation

Tables 6 and 7 show the estimation results of pooled Ordinary Least
Squares (OLS), fixed and random effect, models in Equations (1) and
(2). The analysis of the results is presented below and categorized into
two groups; insurance company‐specific and control variables, which
affect the financial performance using both ROA and ROE as
dependent variables that are regressed independently against both
categories of explanatory variables as explained in Equations (3) and
(4). Following is the discussion of the results based on these two
categories.
1- insurance company‐specific
As shown in Table 6, ROA is used as a dependent variable and a
function of both categories of insurance company‐specific and control
variables, to some extent, all the three models conducted show similar
results. The results in these models demonstrate that IRCE,RE,FRE,
RET, have a significant impact on financial performance measured by
ROA, further, only CRE, and REDEP , have a significant impact on
financial performance in the case of pooled and Random effect
models, As expected in Table 2, across the three models, it has been
found that IRCE,RE,FRE, RET affect significantly and negatively the
financial performance of Egyptian insurance company , as measured

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by ROA at the level of 1% level of significance (P value < 0.01), This
is consistent with some earlier studies (e.g., Adebowale
andAdebayo,2018;ADULOJU and
TABLE 6 Model estimation results summary
ROA Variable Pooled Fixed Random
Coeff. SD.Er t Prob. Coeff. SD.Er t Prob. Coeff. SD.Er t Prob.
C 37.6009 11.9437 3.1482 0.002 44.9376 64.348 0.6984 0.4862 37.601 10.3 3.651 0.0004
Insurance and reinsurance‐specific
IRCE -0.0662 0.01622 -4.081 0.0001 -0.062 0.017 -3.643 0.0004 -0.066 0.014 -4.733 0.000
RE -0.5733 0.13422 -4.271 0.000 -0.5437 0.1288 -4.22 0.000 -0.573 0.1157 -4.953 0.000
FRE -0.15724 0.06462 -2.4332 0.0162 -0.16658 0.0812 -2.0524 0.0421 -0.1572 0.0557 -2.822 0.0054
LCRE -0.0000775 0.00056 -0.138 0.8901 0.00067 0.0005 1.2214 0.2241 -0.0000775 0.0005 -0.16 0.8727
LFRE 0.01791 0.01858 0.9638 0.3367 0.02796 0.0233 1.2014 0.2318 0.0179 0.016 1.118 0.2655
RET -0.3561 0.11365 -3.133 0.0021 -0.4365 0.1153 -3.786 0.0002 -0.356 0.098 -3.634 0.0004
CRE 0.10382 0.03034 3.4214 0.0008 0.0486 0.0297 1.6389 0.1036 0.1038 0.0262 3.968 0.0001
REDEP 0.06281 0.02902 2.1646 0.032 -0.0376 0.0524 -0.717 0.4748 0.0628 0.025 2.51 0.0131
Control variable
SIZE 0.73748 0.95625 0.7712 0.4418 3.87202 1.6036 2.4146 0.0171 0.7375 0.8246 0.894 0.3726
AGE -0.0335 0.03416 -0.98 0.3285 -0.7494 1.8858 -0.397 0.6917 -0.033 0.0295 -1.137 0.2574
LEV 0.21988 1.1448 0.1921 0.848 -4.64687 1.3039 -3.5637 0.0005 0.2199 0.9872 0.223 0.8241
Adjusted R2 0.29 0.47 0.29
F‐statistic 6.78 6.009 6.78
Prob (F‐statistic) 0.00 0.00 0.00
Hausman test 0.00
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);FRE: foreign reinsurer premium ceded to
foreign reinsurer (%);LCRE: local claim coming from local reinsurer(%);FCRE: foreign claim coming from foreign
reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of commotion(%);REDEP: the ratio of insurance
dependence(%);SIZE: natural logarithm of total assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio
of insurance profit before taxes to total assets; ROE: ratio of insurance profit before taxes to shareholders equity.

AJEMUNIGBOHUN,2017; TOMISLAVA et.al ,2017; OBONYO,

2016;Cummins et.al,2012), who agreed that the ratio of reinsurance
and retention affect the financial performance of the insurance
company , On the contrary, Iqbal and Rehman, (2014) reported that
the ratio of ceded reinsurance have a significant and positive
relationship with ROA, and the ratio of reinsurance recoverable to
policyholder‟s surplus is insignificant and negative relationship with
ROA, Bressan (2018), Mazviona et.al(2017), KRAMARIC and
PAVIC(2017), Cummins et.al(2012) , and Datu(2015)reported a
significant and positive relationship between the ratio of reinsurance
and ROA, Along the same line, the results declare that CRE ratio
affects significantly ROA at the level of 1% (P value < 0.01).
Expectedly, the coefficient of CRE ratio is found to have a positive
value. The results are similar with the studies of OBONYO (2016),

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Augustine and Lukmon(2017), so well ,the ratio of REDEP affects
significantly ROA at the level of 1% (P value < 0.01). Expectedly, the
coefficient of CRE ratio is found to have a positive value, The results
are different with the studies of Reshid(2015) ,reported insignificant
and negative relationship of REDEP with ROA, and similar with
Adebowale and Adebayo(2018), Lire and Tegegn (2016),which
reported a significant and positive relationship between REDEP and
ROA, On the contrary, Sisay(2017) reported insignificant and positive
relationship between REDEP and ROA.
TABLE 7 Model estimation results summary
ROE Variable Pooled Fixed Random
Coeff. SD.Er T Prob. Coeff. SD.Er t Prob. Coeff. SD.Er t Prob.
C -90.9763 90.7745 -1.002 0.3179 -23.062 588.437 -0.0392 0.9688 -90.976 94.1872 -0.966 0.3357
Insurance and reinsurance‐specific
IRCE 0.176668 0.12328 1.433 0.154 0.03331 0.15576 0.2138 0.831 0.17667 0.12792 1.381 0.1693
RE -0.35936 1.02012 -0.352 0.7251 -1.2148 1.17818 -1.031 0.3044 -0.3594 1.05848 -0.34 0.7347
FRE -0.38341 0.49115 -0.781 0.4363 0.16902 0.74219 0.2277 0.8202 -0.3834 0.50962 -0.752 0.453
LCRE 0.001437 0.00426 0.3378 0.736 -0.0004 0.00499 -0.0897 0.9287 0.00144 0.00442 0.326 0.7452
LFRE -0.1157 0.14123 -0.819 0.4139 -0.3064 0.21281 -1.4396 0.1524 -0.1157 0.14654 -0.79 0.431
RET -0.14896 0.86375 -0.172 0.8633 -0.6512 1.05434 -0.6176 0.5379 -0.149 0.89622 -0.166 0.8682
CRE -0.23684 0.23061 -1.027 0.3061 -0.1348 0.27119 -0.4969 0.6201 -0.2368 0.23928 -0.99 0.3239
REDEP 0.280864 0.22053 1.2736 0.2048 0.56627 0.47929 1.1815 0.2396 0.28086 0.22882 1.227 0.2216
Control variable
SIZE 28.98072 7.26765 3.9876 0.0001 33.8587 14.6643 2.3089 0.0225 28.9807 7.54088 3.843 0.0002
AGE -0.57843 0.25966 -2.228 0.0274 -2.1203 17.2451 -0.123 0.9023 -0.5784 0.26942 -2.147 0.0334
LEV 7.208987 8.7007 0.8286 0.4087 7.10172 11.924 0.5956 0.5525 7.20899 9.02781 0.799 0.4258
Adjusted R2 0.17 0.11 0.174
F‐statistic 4.06 1.71 4.06
Prob (F‐statistic) 0 0.02 0
Hausman test 0.938
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);FRE: foreign reinsurer premium ceded to
foreign reinsurer (%);LCRE: local claim coming from local reinsurer(%);FCRE: foreign claim coming from foreign
reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of commotion(%);REDEP: the ratio of insurance
dependence(%);SIZE: natural logarithm of total assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio
of insurance profit before taxes to total assets; ROE: ratio of insurance profit before taxes to shareholders equity.
In addition, the results in Table 6 demonstrate insignificant impact of
LCRE and LFRE ratio on ROA in the three models at the level of 5%
(P value < 0.05) in the three models, however LCRE ratio is a
negative effect with ROA in both pooled and random effect models,
and a positive relationship in the fixed effect model, the ratio of LFRE
insignificant impact on ROA, and a positive relationship with ROA in
the three models.
With regard to the impact of insurance company‐specific variables on
the financial performance of Egyptian non-life insurance company as
measured by ROE, the results indicate that the ratios of IRCE,

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RE,FRE,LCRE,LFRE,RET,CRE,REDEP are insignificant impact on
ROE ,in the three models ,and IRCE, RE,FRE, LCRE, LFRE,
RET,CRE,REDEP have a positive relationship with ROE in the
random effect model, In addition the ratios of IRCE,LCRE ,REDEP
have a positive effect in both pooled and fixed effect models ,and the
ratios of RE,FRE,LFRE,RET ,CRE have a negative relationship with
ROE in both pooled and fixed effect models, No evidence is found at
any level of significance (P value > 0.05).this results are different with
the studies (e.g., ADULOJU and AJEMUNIGBOHUN,2017; Bressan,
2018; Cummins et.al,2012), which reported significant and positive
relationship between the ratio of RE with ROE , and agreed with
Adebowale and Adebayo (2018) and Iqbal and Rehman(2014),
reported insignificant and positive relationship between RE and ROE.
For the reliability of the three used models, the adjusted R square in
case of ROA is 29%, for the pooled model, 47% in the fixed effect
model, and 29% in the case of the random effect model, It shows that
both insurance company‐specific and control variables are explaining
about 29% to 47% of the variation of non-life insurance company
financial performance as measured by ROA, Similarly, the value of
the adjusted R square in case of ROE is 17% in the pooled model,
11% in the fixed effect model, and 17.4% in the random effect model,
exhibiting that both insurance company‐specific and control variables
are contributing about 11% to 17.4% to the financial performance , To
evaluate and compare the results of the three models (pooled ,fixed,
random) applied, it is clearly seen from the results of Tables 6 and 7
that all models have a P value(0.000) of less than 1% revealing that all
models are fit and significant, Furthermore, Hausman test was
conducted for deciding the appropriate estimated model between The
three models. The P value suggests that fixed effect model is superior
and appropriate than random effect model for ROA , as the P value of
Hausman test is less than 0.05 (P value = 0.00 < 0.01). Accordingly,
Hausman test suggests that fixed effect model is more appropriate
than random effect model for ROA, On the contrary P value of

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Hausman test is more than 0.05 (P value = 0.938 > 0.01) for ROE,
Hausman test suggests that random effect model is more appropriate
than fixed effect model for ROE.
2-Control variables
Regarding the set of control variable that affect the financial
performance of non-life insurance company as measured by ROA, this
study found that, SIZE,AGE, and LEV are insignificant impact on
ROA at any level of significance in both pooled and Random effect
models ,and a positive effect of SIZE and LEV in both pooled and
fixed models ,and negative effect of AGE in the random effect model,
and significant impact of SIZE and LEV on ROA in the fixed effect
model ,with positive effect for SIZE, and negative effect for LEV with
ROA, and no significant of AGE and negative relationship with
ROA,this agreed the studies of (e.g, Mazviona and Sakahuhwa,2017),
reported that no significant and negative relationship between size and
ROA, and different with studies of (e.g., Lee and Lee,2012;; ,Mwangi
and Murigu,2015; Datu,2015; Lire and Tegegn ,2016; Mazviona and
Sakahuhwa,2017;SISAY,2017;Adebowale and Adebayo ,2018;,
Bressan, 2018; ADULOJU and AJEMUNIGBOHUN ,2017;,
TOMISLAVA et.al ,2017; Koc , 2016 ; OBONYO , 2016) ;Mankaı¨
and Belgacem, 2015; Iqbal and Rehman,2014; ,Mirie and Jane
,2015;Burcă and Bătrînca,2014; Cummins et.al,2012; Cummins
et.al,2008;Chen and Hamwi, 2000),reported a significant and positive
relationship between size and age with ROA, and the studies of (e.g,
Burcă and Bătrînca,2014; Lee and Lee,2012; Mwangi and
Murigu,2015;Mazviona and Sakahuhwa,2017)reported a significant
and negative relationship with ROA.
Although SIZE is significant and positive relationship with ROE in
the three models ,and this result agreed with (e.g., Burcă and
Bătrînca,2014; KRAMARIC and PAVIC,2017; Cummins et.al,2012;
Mankaı¨ and Belgacem,2015; Lire and Tegegn,2016; Malik,2011;
Bressan ,2018),AGE is significant and negative relationship with ROE
in both pooled and random effect models, and insignificant and
negative in the fixed effect models ,this deferent with (e.g., Burcă and
Bătrînca,2014, ; KRAMARIC and PAVIC,2017) reported significant

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and positive relationship with ROE, so well LEV insignificant and
positive relationship with ROE in the three models , On the contrary
the studies (e.g, Burcă and Bătrînca,2014; Malik,2011) reported
significant and negative relationship with ROE.
In this view, We can conclude that each variable CONTROL
investigated in this study ( SIZE and LEV) except AGE significant
with ROA in the fixed effect model, and significant AGE and SIZE
with ROE in the random effect model ,and that mean the important of
control variables(SIZE and LEV)in effect on financial performance of
Egyptian non-life insurance company measured by ROA, and
important of (AGE ,and SIZE) in effect on financial performance
measured by ROE.
5.5 | Robustness analysis
When confronted with highly idealized models of phenomena, they
require a method for determining which aspects of their models make
trustworthy predictions or can reliably be used in explanations,
robustness analysis provides an alternative method for determining
when models make trustworthy predictions about their targets,
Robustness testing analyzes the uncertainty of models and tests
whether estimated effects of interest are sensitive to changes in model
specifications, Beck and Katz (1995) reported that generalized least
squares (FGLS) The standard error coefficients that were
underestimated when compared to the "corrected standard errors from
the board", we found the estimated PCSE accurately estimate the
standard errors without any loss of efficiency. Based on PCSE, it
produces accurate standard coefficient errors compared to OLS (Al-
Maqtari, 2018). PCSE standard error estimation is strong not only for
unit heteroskedasticity but also against potential contemporary
correlation across units (Bailey & Katz, 2011))

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TABLE 8 Panel‐corrected standards error (PCSE)
Variable ROA: PCSE by: xtpcse, corr (psar1) ROE: PCSE by: xtpcse, corr (psar1)
Coef. Std. Err. z P>z Coef. Std. Err. z P>z
C 37.60086 21.04323 1.79 0.074 -90.9763 40.26588 -2.26 0.024
Insurance and reinsurance‐specific
IRCE -0.06621 0.232213 -3.54 0.000 0.01766684 0.079348 2.23 0.026
RE -0.57328 0.232213 -2.47 0.014 -0.35936 0.785273 -0.46 0.647
FRE -7.8E-05 0.065458 2.4 0.016 -0.38341 0.405974 -0.94 0.345
LCRE -7.8E-05 0.000448 -0.17 0.863 0.001438 0.002422 0.59 0.553
LFRE 0.017909 0.02405 0.74 0.456 -0.1157 0.146298 -0.79 0.429
RET -0.35612 0.208318 -1.71 0.087 -0.14896 0.475609 -0.31 0.754
CRE 0.103816 0.034091 3.05 0.002 -0.23684 0.285929 -0.83 0.407
REDEP 0.062808 0.043382 1.45 0.148 0.280864 0.135735 2.07 0.039
Control variable
SIZE 0.737484 1.354357 0.54 0.586 28.98072 8.751471 3.31 0.001
AGE -0.03349 0.043855 -0.76 0.445 0.578433 0.21868 -2.65 0.008
LEV 0.219877 1.516793 0.14 0.885 7.208987 5.70974 1.26 0.207
No. of obs 81 81
No. of groups 9 9
Est. covariances 45 45
Est. coefficients 12 12
R2 0.335 0.232
Wald χ2 (11) 50.87 135.98
Prob > χ2 0.000 0.000
Note: IRCE :insurance and reinsurance debts(%),RE: the ratio of reinsurance(%);FRE: foreign reinsurer premium
ceded to foreign reinsurer (%);LCRE: local claim coming from local reinsurer(%);FCRE: foreign claim coming from
foreign reinsurer(%);RET: the ratio of retention(%);CRE: the ratio of commotion(%);REDEP: the ratio of insurance
dependence(%);SIZE: natural logarithm of total assets; AGE: number of working year; LEV: financial risk (%);ROA: ratio
of insurance profit before taxes to total assets; ROE: ratio of insurance profit before taxes to shareholders equity.
This study applied PCSE where the panel is constituted by 9 non- life
insurance company in 9 years, the PCSE is the most suitable
estimator.
Table 8 provides results of the PCSE. PCSE is a panel correction
standard error that arbitrary accounts for heteroscedasticity within
cross-sectional correlation (Beck& Katz, 1995). With reference to
insurance company‐specific variables and ROA, PCSE model
provides evidence that IRCE ratio, RE ratio ,FRE ratio ,CRE ratio
have statistically significant impact on ROA, All of these ratios are
found to be statistically significant at the level of 1% (P value < 0.01),
Notably, they all have a negative coefficient that denotes a significant
negative impact or decrease on financial performance of the Egyptian
non- life insurance company as measured by ROA, except CRE ratio
that has a positive coefficient suggesting a significant increase in
ROA. The coefficient sign is met with the expected sign stated in
Table 2.

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In terms of ROE, among the insurance company‐specific variables the
results show that only IRCE ratio and REDEP ratio have statistically
significant impact on ROE. at the level of 1% (P value < 0.01).
Notably, they all have a positive coefficient that denotes a significant
positive impact or increase on financial performance of the Egyptian
non- life insurance Company as measured by ROE.
However, the majority of control variables results show insignificant
impact on financial performance as measured by ROA at the level of
1% (P value < 0.01), Similarly, all control variables excepting LEV,
reveal a significant impact on ROE. This significant impact is at the
level of 1% (P value < 0.01).
Overall, the estimated adjusted R squared for PCSE model is 33.5% in
case of ROA and 23.2% for ROE. This suggests that both insurance
company‐specific and control variables investigated by this study are
contributing about 33.5% and 23.2% to the variability of ROA and
ROE, respectively. In other words, 33.5% and 23.2% of the total
variability is accounted for by the models stated in Equations 3 and 4.

6 CONCLUSION AND RECOMMENDATIONS

The Egyptian non-life insurance company facing a lot of changes and
challenges ,which include Entry of foreign insurance company
according to GATS treaty which include the freedom of interning
foreign insurance company to the Egyptian market ,and this lead to
more competition between local and foreign insurance company .
in addition the abolition of the Egyptian reinsurance company since
2007 ,and this lead to Lack of reinsurance company in the Egyptian
market ,an so the increasing the premium forward to foreign
reinsurance company ,and effect on financial performance of
insurance company ,so well ,the merger and equation between the big
three local insurance company in one big company ,in the last ,the
economic conditions in Egypt after the year 2011,and decreasing the
value of local currency in forint the foreign currency ,all this changes
affect the financial performance of insurance company in Egypt .
so the aim of this study investigate the effect of reinsurance
operations(9 non-life insurance company ,ranging from 2008 to 2016)

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as independent variables (such as the ratio of insurance and
reinsurance debts to equity , IRCE ,the ratio of premium ceded to
reinsurance company or the ratio of reinsurance , RE, the ratio of local
premium to total premium , LRE, the ratio of foreign premium to
total premium ceded to reinsurance company ,FRE, the ratio of local
claim to total premium, LCRE, the ratio of foreign claim to total
premium, FRCE, the ratio of retention that mean the percent of
premium ceded to reinsurance company to total premium of insurance
company , RET, the ratio of commission that the commission the
reinsurance company pay to insurance company ,CRE, the ratio of
reinsurance dependence which mean the percent of reinsurance
premium ceded to total assets ,REDEP) on financial performance
measured by ROA (the net profit before taxes to total assets)and
ROE(the net profits before taxes to equity)as dependent variables .
There are control variable that may be increase or decrease the
financial performance measured by ROA and ROE ,this variables
include market share, the percent premium of company to the total
premium of the market ,MS ,The SIZE of company which measure by
natural legalism of total assets, age of the company the number of year
operating ,and the leverage the total liabilities to total assets ,LEV.
The results indicate that insurance company –specific such as the ratio
of insurance and reinsurance dept. to equity, the ratio of reinsurance
,the ratio of foreign reinsurance premium to total premium, the ratio of
retention , have a negative impact on ROA, With regard to the impact
of control variables on ROA, the results revealed that a positive
impact of SIZE on ROA, and leverage a negative impact on ROA,
Concerning the insurance company –specific and control variables of
financial performance of Egyptian non-life insurance company
measured by ROE, the results indicate that insignificant impact of all
ratios on ROE, Further, there is a positive impact of size and negative
impact of age on ROE, and insignificant and positive impact of
leverage on ROE.
The findings of this study have considerable implications for Decision
makers, shareholders in insurance companies, supervisors of insurance
companies and employees of reinsurance department in insurance

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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
companies, analysts, and Academicians, Decision makers and
employees of reinsurance department in insurance companies should
focus on the ratios that decrees the profitability of Egyptian non-life
insurance company More emphasis should be given to the ratio of
reinsurance ,the ratio of foreign reinsurance premium ,the debts. On
the other insurance and reinsurance company ,minimizing the ratio of
reinsurance ,Reducing the value of debts to insurance companies
towards other insurance and reinsurance companies, put underwriting
policies supporting to evaluate risks more accurate and decreeing the
depending on reinsurance company ,select the appropriate treaty
reinsurance ,for regulator construct local reinsurance company to
reduce the premium forward to foreign reinsurance and increase the
financial performance of non-life insurance company ,increasing the
commission from reinsurance company to increase the financial
performance.
In addition Decision makers and insurance company supervisors must
Interested in the leverage and investment in assets of insurance
company and its effect on financial performance ,as more leverage
decrease the ROA as a measure financial performance of insurance
company.
Finally, future research could investigate this issue by including more
variables or using other techniques of analysis such as the ratio of
reinsurance in takful insurance company and effect on financial
performance ,further using more control variables that affect the
financial performance , future studies may compare the financial
performance of non- life insurance company with the private and
public sectors ,This study sought to bridge a gap by providing new
empirical evidence on the reinsurance operations and control variables
that affect the financial performance of Egyptian non – Life Insurance
Company.
The findings of the present study have considerable contributions to
the existing stock of prior studies by comprehensively explaining and
empirically analyzing the current state of financial performance of
non- life insurance company in Egypt, It focuses on a major and
important sector in an emerging economy like Egypt , It gives

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
attention to some crucial events that happened and effect on the
insurance sector in Egypt such Entry of foreign insurance company ,
the abolition of the Egyptian reinsurance company since 2007 ,merger
and equation between the big three local insurance company
,decreasing the value of local currency in forint the foreign currency ,
Further, a unique contribution of this study is to consider the effect of
reinsurance operation on financial performance of non-life insurance
company in Egypt.

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9102 – ‫العدد الثاني‬ ‫مجلة الدراسات المالية و التجارية‬
‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
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‫أثر عمليات اعادة التأمين على االداء المالي‬ ‫محمد محمد حافظ‬
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