Eva Grmanová

Alexander Dubček University of Trenčín

Trenčín, Slovak Republic

Email: eva.grmanova@tnuni.sk

Efficiency of insurance companies: Application of DEA and Tobit analyses

Herbert Strunz

Alexander Dubček University of Trenčín

Trenčín, Slovak Republic

Email: herbert.strunz@gmx.de

Abstract. The aim of this paper is to determine the relationship between technical efficiency and profitability of insurance companies. The profitability of insurance companies was expressed by such indicators as ROA, ROE and the size of assets. We analysed 15 commercial insurance companies in Slovakia in the period of 2013-2015. Technical efficiency scores were expressed using DEA models. The relationship between the technical efficiency score and the indicators of profitability was expressed using censored regression, i.e. the Tobit regression model and the Mann-Whitney U-test. The relationship between the technical efficiency score in the CCR and BCC models and all the groups formed on the basis of the return on assets and the group formed basing on the return on equity was not confirmed. Statistically significant difference between average technical efficiency score in the CCR model in the group of insurance companies with ROA <1%,2%) and technical efficiency score in the CCR model in the group of insurance companies with ROA equal or higher than 2 was confirmed. Insurance companies with ROA equal or higher than 2 achieved greater average efficiency score in the CCR model than the group of insurance companies with ROA <1%,2%).

Received: May, 2017

1st Revision: August, 2017

Accepted: October, 2017

DOI: 10.14254/2071-8330.2017/10-3/18

JEL Classification: G22, C52

Keywords: DEA models, efficiency score, Tobit regression, ROA, ROE