Impact of the Investment Portfolio Structure on Croatian Insurance Companies' Profitability

As financial intermediaries, insurance companies mobilize long term savings and allocate them conservatively, guided primarily by the safety principle instead of the profitability principle. Assets covering technical and mathematical provisions consist of investment portfolio asset classes whose structure determines the profitability of insurers and their exposure to financial risks. The aim of this paper is to examine the investment portfolio of Croatian insurers and economic conditions affecting its structure, as well as to quantitatively investigate the link between asset allocation and insurance companies' profitability. Econometric analysis includes data from financial statements for the period 2008-2015, which are analyzed using the panel data analysis. The results reveal the direction and strength of the statistical link between the financial results and the structure of invested assets covering technical and mathematical provisions. Since the analyzed period refers to the period before Solvency II, conclusions about the expected changes in asset allocation that financial reregulation brings will also be made.