Evaluation of financial performance and rating of insurance companies active in the stock exchange

Dissertation for Master's Degree in Industrial Management (M.A)

Trend: Finance

Abstract

Capital market activists and stakeholders of stock supply companies need a tool so that they can compare similar companies and choose the desired stocks based on this and considering the purpose of investment. Therefore, the design of the model for evaluating the performance and rating of insurance companies as one of the active industries in the Tehran Stock Exchange has been the main goal of this research. In this research, in order to present the financial evaluation model of the insurance companies present in the stock exchange, using the Delphi method and the group AHP model, and by polling fifteen financial and supervisory experts of the insurance industry, the main factors and sub-factors of the model have been identified and prioritized. Then, using the obtained model and the information of the insurance companies present in the stock market, which were collected through valid and official documents, these companies were ranked. As a result of the research, the main factors of the model, in order of priority, include factors based on insurance activities with a weight of 0.706, factors based on the stock market with a weight of 0.164, and factors based on accounting with a weight of 0.130. In each category, factors have been identified to calculate the total score of the company. Finally, five companies present in the Tehran Stock Exchange have been ranked using the present model and by calculating financial, insurance and capital market indicators.

Key words: rating, performance evaluation, insurance company, hierarchical analysis

Chapter 1

Research overview

- Introduction

In today's competitive world, only organizations and companies can compete and create profitability by paying special attention to planning and evaluating their performance compared to competitors. Since the survival of organizations is only possible through the optimal use of resources and facilities, the most obvious characteristic of any dynamic and growing organization is the effective evaluation and criticism of the activities and actions carried out over time, because it is only in the shadow of such an approach that decision-making based on information, and moving from daily routine and day-to-day planning to systematic planning is possible. This is much more tangible in organizations such as insurance because selling services is much more difficult than selling manufactured goods. The clearest reason for this is the visibility of goods, while the purchase of services generally has a different nature.

Some researchers believe that a suitable performance evaluation tool should be able to include a wide range of performance criteria, others point out that performance evaluation tools should provide the possibility of comparative evaluations for organizations. Therefore, it is clear that the shareholders, managers, investors and other stakeholders in this situation need a model and a tool so that they can recognize the position of the company in relation to the competitors and the environment and make the necessary arrangements. In this research, indicators and sub-indices for measuring financial performance in insurance companies active in the Tehran Stock Exchange, the importance and weight of each index and sub-indicator are determined using decision-making methods in management, and finally, the ranking of insurance companies active in the stock exchange is discussed. and others [1], 2012). It is clear that managers in this situation need a tool so that they can identify their position in relation to competitors and the environment and make the necessary arrangements to achieve the next goals.

Global experience indicates that the insurance industry, as a part of the financial industry, must have a proper mutual relationship with the capital market. This relationship, in the era of globalization, crystallizes in two ways: on the one hand, the development of the insurance business requires a strong capital market. and on the other hand, the growth of the capital market itself is based on the active participation of insurance funds in this market (Abde Tabrizi, 2010).

One of the ways to expand the relationship between the insurance industry and the financial markets is to privatize and transfer insurance companies through the stock market from the public sector to the private sector. In different ways, government insurance companies can be handed over to non-government sectors. The three methods of selling assets, offering shares to the public, and issuing and distributing coupons are the most common methods of privatization.In the method of offering shares to the public, shares are offered freely and unconditionally to the private sector in the financial markets (stock exchange). This method has been favored by many countries due to its low cost and compliance with the market mechanism (Mahdavi, Siflo, 2019). Currently, some insurance companies such as Dana, Asia, Mellat and They are in Tehran Stock Exchange. Due to the fact that insurance companies engage in the purchase of risk, there are special items such as technical reserves in the financial statements of these companies. Lack of proper supervision and proper actuary can cause problems for the company in the long term and this issue is not reflected in the financial statements. Therefore, it is very necessary to provide an efficient model for evaluating the financial performance of insurance companies. Figure 1-1 shows the research problem by comparing the current and desired state.

1-3- Research Objectives

The objective of scientific research is to propose the correct and useful bases for decision-making in the field of solving organizational problems, together with reasons and objective evidence, the correct use of techniques, techniques and methods of analyzing information and facts.

1-3-1- The main objective

Determination and explanation The portfolio of main and secondary factors affecting the financial evaluation of insurance companies active in the stock exchange. 1-3-2- Sub-objectives Prioritization and weighting of the main and secondary factors affecting the financial evaluation of insurance companies active in the stock exchange. To provide a suitable and efficient model for the financial evaluation of insurance companies active in the stock exchange. 1-3-3- Practical objectives The purpose of this research is to explain the model The financial evaluation of insurance companies active in the stock market is the most important beneficiary of the current research results of insurance companies; And investors and capital market activists can use the results of the research.

1-4- The importance of the research topic and the motivation for choosing it

Today, organizations operate in an environment that is increasingly moving towards a value-based economy, and successful and progressive organizations identify their position in the market by planning and evaluating their performance and seek to use their strengths to create opportunities so that they can attract the attention of investors and increase the value of their shares. Financial metrics can be a good reflection of companies' performance and provide useful quantitative information about the operations and status of companies for investors and analysts at different times (Yelkin et al., 2012). In general, in financial evaluation models, two categories of criteria, accounting-based financial performance criteria[1] and value-based financial performance criteria[2] are examined. According to the opinions of financial experts, accounting-based criteria include asset return rate[3], equity[4], operating profit growth[5] and price-to-earnings ratio. Also, value-based criteria include economic added value [6], market added value [7], cash added value [8], refined economic added value, real added value [9], Qotubin and created shareholder value [10].

According to what has been said and since there are a number of the most reliable companies in the country operating in the Tehran Stock Exchange, the existence of a suitable performance evaluation system, especially in the financial sector, is a reason for evaluating insurance companies. The performance of insurance companies is more transparent compared to other companies. This model can become an effective tool in making decisions for brokers and capital market investors to buy shares of insurance companies.

1-5- Research questions

1-5-1- The main question

What are the main and secondary factors affecting the financial evaluation of insurance companies active in the stock market?

1-5-2- Subquestions

Prioritization of the main and secondary factors affecting the evaluation What is the finance of insurance companies active in the stock exchange?

What is the ranking of insurance companies active in the stock exchange?

1-6- Population and statistical sample

This research was conducted on insurance companies active in the stock exchange, so the research population is Asia, Dana, Alborz, Parsian and Mellat insurance companies. Also, for interviews and surveys, experts who were managers of Central Insurance of J.A. have been used.

1-7- Statistical sample selection method

In this research, all the insurance companies present in the Tehran Stock Exchange have been evaluated. Therefore, this research did not have sampling and the research was carried out from the entire community. Regarding the selection of experts, central insurance managers and experts who have characteristics, relevance of the job to the topic of monitoring and evaluation and availability have been selected.