The Impact of Solvency on Profitability and Risk of Insurance companies listed on the Egyptian Stock Market

This study investigates the impact of solvency on profitability and risk of insurance companies listed on the Egyptian Stock Market during the period from 2013 to 2023. The research utilizes a balanced panel dataset's comprising annual financial information from two publicly traded Egyptian insurance companies: El-Mohandes Insurance Company and Al-Delta Insurance Company.These companies represent the entire sample of listed insurers, a subset of the 41 total insurance and reinsurance entities in Egypt. The study employs panel data regression analysis, utilizing both Fixed Effects and Random Effects models, with the Hausman Test determining the most appropriate specification for each relationship. Robust standard errors were applied to ensure reliable inference. Descriptive statistics revealed varying characteristics across the financial indicators, highlighting the diversity within the sample. The empirical results indicate that while a positive association between solvency and profitability was observed, this relationship was not statistically significant. Similarly, the impact of solvency on Beta (systematic risk) was found to be not statistically significant. However, for risk metrics such as Loss Ratio and Standard Deviation of Return, although a negative relationship with solvency was generally observed (suggesting higher solvency might lead to lower risk), these effects were also found to be not statistically significant in the analyzed models. Overall, the findings suggest that for the two sampled Egyptian insurance companies, solvency does not have a statistically significant influence on either profitability or the studied risk measures during the research period. This implies that other factors might play a more dominant role in determining the financial performance and risk profiles of these firms.