Effect of Current and Cash Ratios on the Financial Performance of Listed Insurance Companies in Nigeria

This study aims to examine the effect of current and cash ratios on the financial performance of listed insurance companies in Nigeria. Ex-post facto research design was adopted, while a secondary source of data collection was employed. Data were collected from the annual financial reports of six listed insurance companies. The study utilized panel regression to analyse the data from a sample of six (6) listed insurance companies on the Nigerian Exchange Group (NGX) from 2014 - 2023. The results of the panel regression revealed that the current ratio has a significant effect on the financial performance of the listed insurance companies in Nigeria. However, the cash ratio had an insignificant effect on the financial performance of the listed insurance companies in Nigeria. The study recommends that insurance companies should conduct internal liquidity assessments to establish a firm-specific optimal current ratio benchmark that balances liquidity and profitability as a measure of financial performance. To prevent liquidity shortages or excessive idle funds, insurance firms should invest in real-time liquidity monitoring systems. These systems should track daily cash inflows from premiums, investment returns, and claim payouts, enabling proactive financial decision-making. Also, excess cash that does not contribute to day-to-day operations should be strategically invested. Insurance companies can develop dynamic asset allocation models that adjust to market conditions, thereby investing idle cash in revenue-generating instruments. This approach can be guided by periodic reviews of cash flow forecasts and market trends, ensuring that excess liquidity is efficiently deployed.