ABSTRACT
Firm specific characteristics have been identified to have an immeasurable role in enhancing the financial performance of companies, but available literatures in this area are mixed and inconclusive. Owing to these mixed and inconclusive findings, the study therefore investigates the impact of firm specific characteristics on the financial performance of listed insurance firms in Nigeria. Financial performance is the dependent variable while age if insurance company, firm size, premium growth, loss ratio, liquidity and leverage are independent variables. The population of the study consists of thirty (30) listed insurance firms as at 31st December 2013. Twelve of the listed insurance firms are selected to form the sample of the study for the period of eight years (2006-2013). The study employed multiple regressions as tool for analysis. Secondary data obtained from the financial statements of the companies were analyzed. Panel data techniques (fixed and random effects model) were utilized to investigate the impact of firm specific characteristics on financial performance and Hausman specification confirmed that random effect model is more appropriate. The result shows that firm size, loss ratio, liquidity, and leverage are the most important determinants of financial performance. Hence, firm size, loss ratio and leverage are negatively related. In contrast, liquidity ratio is positively and significantly related with financial performance. Lastly, age of insurance company and premium growth are not significantly related with financial performance of listed insurance firms in Nigeria. For insurance companies to achieve a greater profit and competitiveness in the market, it is therefore recommended that the companies should conduct careful evaluation and take into consideration firm specific characteristics (firm size, loss ratio, liquidity and leverage) that influence the financial performance of the company before making major business decision as this will go a long way in improving their financial performance.

TABLE OF CONTENTS
Abstract
CHAPTER ONE: INTRODUCTION

1.1 Background to the Study
1.2 Statement of the Research Problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Statement of Hypotheses
1.6 Scope of the Study
1.7 Significance of the Study

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction
2.2 Conceptual Analysis
2.3 Review of empirical studies
2.4 Theoretical framework
2.5 Summary of the chapter

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction
3.2 Research Design
3.3 Population and Sample of the Study
3.4 Sources and Method of Data Collection
3.5 Techniques and Justification of Data Analysis
3.6 Variable Measurement
3.7 Model Specification
3.8 Summary of the chapter

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Introduction
4.2 Descriptive Statistics
4.3 Correlation Matrix
4.4 Heteroscedasticity Test
4.5 Presentation and Discussion of Regression Result
4.6 Hypotheses Testing
4.7 Robustness Test
4.8 Implication of findings

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendations
5.4 Limitations of the Study
5.5 Suggestions for Further Research
References
Appendix

CHAPTER ONE INTRODUCTION
1.1 Background to the Study
The insurance industry plays a major role in the society as they stimulate the economy at large. This is because the sector is part of immune and repair system of an economy and successful operation of the industry can set energy for other industries and development of an economy (Abate, 2012). Indeed, a well-developed and evolved insurance industry is critical to conditions for economic development as it provides long term funds for long term investment and at the same time strengthens the risk taking ability of the country.

The importance of insurance companies become more obvious for businesses and individuals as they indemnify business losses, thereby safeguarding economic activities in the society from collapse. Insurers provide economic and social benefits in the society not only by prevention of losses, but through reduction in anxiety and fear, increase employment and also through accumulated premium generated for long term investment. Thus, like any other industry, insurance companies are expected to continue improving their performance so as to sustain their role in the society.

The performance of any business firm not only plays the role to increase the market value of that specific firm but also leads toward the growth of the whole sector and the overall success of the economy (Ahmed, Naveed & Usman). In this regards, a sound financial management should be consistent with the drives to improve and increase profitability so as to meet the goal of individual firm owners. The primary desire of any firm is to earn more profit and enhance the wealth of its stakeholders (Gitman, 2007). However due to challenges in internal and external environment, most firms are unable to meet their goals. In other words, performance is a function of the ability of an organization to gain and manage its resources in several different ways so as to develop competitive advantages (Iswatia & Anshoria, 2007).

The performance of insurance companies could be affected by both internal and external factors. The internal factors are those management controllable factors which account for the inter-firm differences in profitability. On the other hand, external factors are uncontrollable factors which affect firms decision and which management have no control over. However, factors such as growth in money supply, interest rate, inflation rate and gross domestic product are macroeconomic or market-specific factors which are out of control of management. Generally, a firm‟s performance can be estimated using firm attributes as a major determinants of insurance profitability. These attributes are firm size, underwriting risk, leverage, age, growth rate of written insurance premium as well as institution and political environment which plays vital roles besides firm specific factors of organization behavior.

In line with the above explanation, the internal factors which focus on insurer‟s specific characteristics are grouped into financial and non-financial variables. The financial characteristics are variables which can be derived from the financial statement and profit and loss of insurance companies. These include firm size, premium growth, loss ratio or underwriting of risk, liquidity, tangibility, leverage and so on. On the other hand, non-financial characteristics are those variables which cannot be obtained from the financial statement and profit and loss of insurance companies. They comprise of age of the firm, management competencies, and scope of operation. Although management competencies lead to good financial performance, it is difficult if not impossible to assess management competencies directly because it is assumed that such competencies will be reflected in the operational performance of insurance firms. This study therefore combined five financial variables (firm size, premium growth, loss ratio, liquidity, and leverage) coupled with one non-financial variable which is age of the firm as proxies for firm specific characteristics against the financial performance of listed insurance firms in Nigeria. This study therefore embarks on empirical investigation to find out those firm specific attributes that affect the financial performance of listed insurance firms in Nigeria

1.2 Statement of the Research Problem
Insurance industry plays a crucial role in fostering commercial and infrastructural businesses. From the latter perspective, it promotes financial and social stability; mobilizes and channels savings; supports trade, commerce and entrepreneurial activity and improves the quality of the lives of individuals and the overall wellbeing in a country (Malik, 2011). To achieve this role, insurance companies are expected to be financially strong and solvent enough through
profitability in their operations.
The poor performance of insurance firms in Nigeria as noted by Agabi (2009) stemmed from several years of non-payment of claims by underwriting firms. This tradition of defaulting in claims by insurance firms in Nigeria resulted in reduction of their goodwill which translated to poor image of the sector and as a result, confidence in the sector seems to have eroded significantly. As such, Nigerians no longer consider insuring their valuables due to confidence crisis in the sector. In Nigeria today, there are evidence of performance of several industries such as banking and other financial institutions, however, the insurance sector is not responding appropriately to economic growth due to confidence crises in the sector. This implies that the overall financial performance of insurance firms in Nigeria is weak except for those who have diverse sources of investment.
Measuring the financial performance of insurance companies has therefore gained significant attention in the developed and some developing countries in the area of business and corporate finance literature. As underwriters, these companies are not only providing good mechanism for transferring risk but also help to boost entrepreneurial confidence in appropriate way so as to support investment growth and general economic activities.
Profitability is a vital concern to all groups who have a direct or indirect interest in the firm. In spite of these vital roles that profit plays in the going concern of insurance firms, the profitability status of most insurance firms operating in Nigeria in relation to firm age, firm size, premium growth, loss ratio, liquidity and leverage of the firm have not attracted much attention of researchers in area of finance. This may be attributed to lack of thorough evaluation of factors that play critical role in profit realization of insurance firms in Nigeria. Therefore, it is of interest to know the extent to which firm specific characteristics (firm age, firm size, premium growth, loss ratio, liquidity and leverage) affect the financial performance of listed insurance firms in Nigeria. The firm specific characteristics of the insurance firms are to be assessed to provide valuable information in regards to their effects on performance.

There have been series of studies aimed at isolating firms specific characteristics with performance of insurance companies in developed countries (Greene & Segal, 2004, Deshng,
Sandra & Lianga, 2007, Adams, Hardwick & Zou 2008, Al-Shami, 2008, Dieter, 2011, Kozak,
2011 and Charumathi, 2012), while some focused on developing countries (Adams & Buckle,
2003, Ahmed, Naveed & Usman 2011, Abate, 2012, Daniel & Tilahun, 2012, Akotoye, Osei & Gemegah, 2011, Almajali, Sameer & Yahya 2012 and Malik, 2011). However, to the best of our knowledge, none has been done on this sector in Nigeria. Most literatures focus on factors influencing the performance of banks rather than insurance companies (Aburime 2008, Buba 2009, Ani et al 2012 and Akano 2014). Similarly, the outcome of the studies conducted in developed and some developing countries may not be applicable to insurance firms in Nigeria simply because the environment in which the insurance firms operate differs in terms of supervision, regulation and operation. In addition, variables that were used in other studies, especially from developed market may not be consistent with rudimentary Nigeria insurance industry. To this end, the relationship between the firm characteristics and financial performance of insurance firms in Nigeria calls for an empirical investigation. Therefore, mere extension of the findings of studies in other countries with their different conditions to Nigeria is not possible.

1.3 Research Questions
The study therefore addresses the following questions:
i How does age of insurance firms affect the financial performance of listed insurance firms in Nigeria? ii To what extent does firm size influence the financial performance of listed insurance firms in Nigeria?
iii what impact does premium growth rate has on the financial performance of listed insurance firms in Nigeria?
iv What is the contribution of loss ratio to financial performance of listed insurance firms in
Nigeria? v How does liquidity influence the financial performance of listed insurance firms in
Nigeria? vi To what extent does leverage has on the financial performance of listed insurance firms in Nigeria?
1.4 Objectives of the Study
The main objective of this study is to examine the impact of firm specific characteristics on the financial performance of listed insurance firms in Nigeria for the period of 2006 to 2013.
The specific objectives are to:
i Examine the impact of age of the firm on the performance of listed insurance firms in
Nigeria ii Evaluate the contribution of firm size to the performance of listed insurance firms in
Nigeria iii. Ascertain the impact of premium growth rate on the performance of listed insurance firms in Nigeria.
iv. Analyze the impact of loss ratio on the performance of listed insurance firms in Nigeria.
v. Determine the impact of liquidity on the performance of listed insurance firms in
Nigeria.
vi. Examine the impact of leverage on the performance of listed insurance firms in Nigeria.

1.5 Statement of Hypotheses
Following the above stated objectives, below are the hypotheses formulated in null form:
Ho1: Age of the firm has no significant impact on the financial performance of listed insurance firms in Nigeria.
Ho2: Firm size has no significant impact on the financial performance of listed insurance firms in Nigeria.
Ho3: Premium growth rate has no significant impact on the financial performance of listed
insurance companies in Nigeria.
Ho4: Loss ratio has no significant impact on the financial performance of listed insurance firms in Nigeria
Ho5 Liquidity has no significant impact on the financial performance of listed insurance firms in Nigeria.
Ho6: Leverage has no significant impact on the financial performance of Nigerian listed insurance firms.

1.6 Scope of the Study
The study investigates the impact of firm specific characteristics on the financial performance of listed insurance firms in Nigeria. In order to evaluate this impact, the study was conducted for the period of eight years that is from 2006 to 2013. The study period emerges from the fact that there were reforms aimed at increased productivity, performance and efficiency in the industry. The period is considered suitable owing to the fact that it marks the beginning of financial reforms where the insurance firms in Nigeria were required to increase their capital base. The study focused on internal factors because they can be easily measured by using data generated from financial statement of insurance firms in Nigeria and they are controllable factors that are within the control of management of listed insurance firms in Nigeria.

1.7 Significance of the Study
This study is based on the fact that most empirical literatures on the firm specific characteristics are mostly focused on the banking sector. By implication, researchers have not paid enough attention to this area in the insurance sector in Nigeria. That is, most empirical literatures are directed towards the banking sector and not insurance sector. To the best of our knowledge, no or little is known about the insurance industry as far as the study under consideration is concerned, most especially from the perspective of an emerging market like Nigeria. This study therefore expected to provide empirical evidence on the firm specific characteristics affecting the financial performance of listed insurance firms in Nigeria.

The study would provide information to investors in the Nigeria Stock Exchange on the firm characteristics and financial performance so as to protect their investment and direct it to the best and viable investment that will yield benefit in future. Similarly, the study would be of help to management in order to identify the indicators of good performance so as to take necessary actions to improve performance of insurance firms and make good decision that will move organization forward.
Government is interested in knowing which companies operate successfully or failed to take the necessary measures to avoid crises of the bankruptcy in these companies. More so, customers are interested in knowing the ability of insurance companies to pay their obligations based on the indicators of success of the companies.
Business professionals are interested in the outcome of this study so as to render professional advice to their client. Policy makers are interested in this study so as to come up with policy to improve the sector. The findings from this study contribute to finance literature by providing evidence that supports the positive role of firms‟ characteristics in determining the financial performance of listed insurance firms in Nigeria. Additionally, the results could provide accounting practitioners as well as regulators with valuable insight into the complex interactions between different types of firms‟ characteristics and the financial performance of insurance companies.

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