Determinants of Investment Performance: Evidence from the Islamic and Conventional Insurance Companies in Malaysia

Noryati Ahmad, Wan Evva Wan Suriea, Ummu Naziha Mohd Ariffin
Arshad Ayub Graduate Business School, Universiti Teknologi MARA


In Malaysia, the insurance industry is operated by conventional insurance companies and Islamic insurance companies (or better known as Takaful.). Even though the nature of business of these two types of companies is almost similar however at operational and investment level, Islamic insurance companies must be in tune with the Shariah principles. Policyholders, investors and regulators are interested in the performance of these companies. Hence, this study aims to investigate the determinants of investment performance of Islamic and conventional insurance companies in Malaysia. Company-specific factors (company size, solvency margin and liquidity) and macro factors (GDP, interest and profit rates, equity returns and inflation) are independent variables employed in the study. A panel regression was estimated on 11 Islamic and 14 conventional insurance companies in Malaysia from the year 2006 to 2015. Interestingly empirical findings revealed that only liquidity and lagged GDP statistically significant relationship with the investment performance of Islamic insurance companies. On the other hand, in addition to liquidity and lagged GD, the investment performance of conventional insurance companies is also statistically and significantly influenced by interest rate and equity returns. These findings provide policyholders, investors as well as regulators with pertinent information related to an appropriate decision made on Islamic and conventional insurance companies.

Keywords: Equity returns, Conventional insurance companies, Investment yield, Islamic insurance companies, Solvency margin