AL AL-AZHAR UNIVERSITY -GAZA

BUSINESS FACULTY
ACCOUNTING DEPARTMENT
LEVEL " 4 "

analyzing and evaluation of financial performance for insurance ((

))companies

""study case trust insurance company

-:prepared by

Mohammed .K. Bashir

khaled .W. ayyad
AbedAlla .R. Abu Jumaiza

-:Supervisor
Dr/Iskander Nashwan

2015

))))TABLE OF CONTENT

CHAPTER 2/ ((CONCEPTUAL FRAMEWORK))

--: First part

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Introduction ………………………………………………………………………………………………………. ( 3 ) -1.1
study Problem …………………………………………………………………………………………………… ( 3 ) -1.2
1.3- study hypotheses………………………………………………………………………………………………… ( 4 )
study objectives…………………………………………………………………………………………………… ( 4 ) -1.4
…………………………………………………………………………………………………study importance -1.5 ( )
..…………………………………………………………………………………………… study methodology -1.6 ( )
…………………………………………………………………………………………………… study limitation -1.7 ( )
……………………………………………………………………………… Population and study sample -1.8 ( )
…………………………………………………………………………………………………………… study plan -1.9 ( )
--:Second part
Previous studies-1.1
) ……………………………………………………………………………………………
1.2: Comment on the previous studies …………………………………………………………………………

CHAPTER 2/(THEORETICAL FRAMEWORK)

SECTION 3.1/Introduction to insurance companies
.………………………………………………………………………………………… Insurance definition :3.1.1
Sources of the insurance : 3.1.2 ..………………………………………………………………
operations
…………………… Types of insurance services according to the Palestinian Insurance :3.1.3
.…………………………… History and current role for insurance company in Palestine -3.1.4
SECTION3.2/ Financial Performance Evaluation
...……………………………………… The Objectives of financial performance f or investor :3.2.1
3.2.2: Steps to evaluate financial performance …………………………………………………………….
3.2.3:Financial performance with financial ratios Ratio measurements ……………………….
3.2.4: the concept and definition of performance evaluation ……………………………………….
.………………………………………………………………………… the importance of performance :3.2.5
.………………………………………………………… The objectives of performance evaluation :3.2.6
.…………………………………………………………………… performance evaluation indicators :3.2.7
SECTION 3.3 / Financial statement analysis
…………………………………………………………… Definition of financial statement analysis :3.3.1
.………………………………………………………… Objectives of Financial statements Analysis :3.3.2
.………………………………………………………………… Tools of Financial statements Analysis :3.3.4
..…………………………………………………………… Financial analysis for insurance company :3.3.5
………………………………………………………………………… Key Ratios for insurance company:3.3.6
CHAPTER3/((PRACTICAL FRAMEWORK))
Introduction
..…………………………………………………brief description about trust insurance company :3.1
.……………………………………………………………………activates of trust insurance company :3.2
.………………………………………………………… analysis, evaluation and discuss the results :3.3
finantial statement analysis:3.3.1
………………………………………………………………………Vertical analysis +comment

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Horizontal analysis .......................................................................
+comment
evaluation ,analysis by using ratio analysis :3.4
liquidity analysis :3.4.1
Current ratio ...............................................................................................................
Quick ratio ..............................................................................................................
Debt to equity ratio ...................................................................................................
underwriting ratio:3.4.2
Loss rate ratio ..........................................................................................................
Expenses ratio ..........................................................................................................
Combined ratio ........................................................................................................
profitability ratio :3.4.3
Return on revenue ...................................................................................................
Return on assets ..................................................................................................
Return on equity ...................................................................................................
market ratio :3.4.4
Price earning ratio ..................................................................................................
Market value to book value ......................................................................................

CHAPTER 4 /((conclusion& recommendation))

conclusion :4.1 .......................................................................................................
recommendation 4.2 ............................................................................................

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1.1- Introduction:
Company performance is very essential to management as it is an outcome which has been
achieved by an individual or a group of individuals in an organization related to its authority
and responsibility in achieving the goal legally, not against the law, and conforming to the
morale and ethic.

There are two kinds of performance, financial performance and non-financial performance.
Financial performance emphasizes on variables related directly to financial report. The
analysis of financial data employs various techniques to emphasize the comparative and
relative importance of data presented and to evaluate the position of the company. these
techniques include ratio analysis, common-size analysis(Gibson:2011).

Insurance provides economic protection from identified risks occurring or discovered within
a specified period. The insurance activity has improved and spread in the recent years
dramatically until it became part of the most powerful industries. It became one of the
most fundamental pillars that support the economic activity of any State, so companies and
agencies or individuals have had concluded that insurance services became an effective way
to protect their property and their capital against expected risk and loss and to ensure their
.continuity

Countries that have insurance awareness realized the importance of this activity in the
economic development. That's lead them to pay supervision of the existing companies and
also pay attention of its accounting and financial structure by subjecting them to a series of
regulatory and legislative laws, in order to achieve state control and protect of the
insured's funds for example the Insurance Law No. 20 of 2005
A well-planned, well-organized, efficient and viable insurance industry is a necessary
condition for the economic and financial infrastructural development of a country that’s
require periodic analysis for its financial position and assessing its performance fairly.

1.2 - Study Problem

To improve the performance of insurance companies in Palestine where they have to overcome
the deteriorated economic conditions due to the many economic difficulties they face.
Therefore: the performance standards are considered as big issues that are required to be known
in the unstable economic environment .
In fact, there are no permanent solutions, but only the ability to adapt, especially change
management that allows secure life and the survival of the national insurance companies and
there must be a continuous leadership change for the better .
In light of the above, this study came to ask the following main problem
(The research problem is the adoption of traditional financial analysis ratios in assessing the
financial situation Insurance companies without taking into account the privacy of the activities of
insurance companies.)

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1.3- Study Hypothesis:-
Research Hypothesis: The adoption of financial analysis indicators are based on the nature and
privacy of the insurance activity which rationally help in reflecting the real financial position of
the company and the extent of the exploitation of available resources .

1.4- Study Objectives

The main aim of this study is to investigate the factors that mostly affect financial performance of
insurance companies .
This study is ,therefore : attempt to make a comprehensive evaluation of insurance companies
performance.
This aim will be achieved by the following objectives:
 To identify the effect of Leverage, underwriting, profitability, liquidity, Management
competence index on the financial performance of insurance companies.
 To provide some conclusions and recommendations for top management and decision
makers at insurance companies to deal with variables that affect financial performance In
order to enhance their company financial performance.
 To provide the local libraries with scientific material dealing with variables that affect
financial performance on the insurance companies.

1.5- Study Importance: -
 Highlights the importance of research through the development of the work of insurance
institutions in the State of Palestine.
 Data analysis and provide the best indicators for the decision maker.
 Provide the help to the Shareholders, customers and beneficiaries to know the reality of
activity
 Enable management to study the future and put development plans

1.6- Study Methodology:

 Theoretical methodology:
The researcher depended on secondary sources which include previous studies books
Articles , relevant literature, financial statements and reports, and Palestine Exchange
available information in order to collect the scientific content of the theoretical framework
of the study and to explain its basic concepts. Ideas and opinions of researchers and experts
in the insurance sector will be helpful.
 Practical methodology:
Besides, a practical method has been used "case study" that applied on the Trust
Insurance company the data collected were edited, classified and tabular for analysis, the
analytical tools used in this study
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 -analyti cal tools applied "verti cal , horizontal analysis"
-rati o analysis "liquidity, underwriti ng, profi tability, market rati o"

-:Study Limitation -1.7

time limitation:- The period from 2014-2015
place limitation:- The application of this research was limited to the southern
provinces of the State of Palestine, because of the difficulties that faced by the
researcher access to the northern provinces

1.8-Population and study sample

The insurance companies listed in the Palestine exchange represent the population of
Study, there are seven listed companies (Trust, AIG, TIC, PICO,GUI, MIC and NIC)
( http://www.pex.ps/), and we are going to select Trust Company as our case study.

1.9-Research plan :-
This study consist of the following chapters
 Chapter one :- conceptual framework
 Chapter tow :- theoretical framework
 Chapter three:- practical framework
 Chapter four :- conclusions and recommendations

1.1:Previous Studies:

Study (Alfred Tangen, 2003).Type of measures of financial performance in insurance company -1

This study amide to determine the types of measures for insurance company. For example return
on sales reveals how much a company earns in relation to its sales, return on assets determines an
organization’s ability to make use of its assets and return on equity reveals what return investors
take for their investments. The advantages of financial measures are the easiness of calculation
and that definitions are agreed worldwide. Traditionally, the success of a manufacturing system or
.company has been evaluated by the use of financial measures
Study (Muhammad knew : 2006) The study aims to use cluster analysis method to evaluate -2
-:the performance of the insurance companies operating in the Egyptian market
This study included direct insurance companies that practiced general insurance in order to  
arrange them in terms of its financial performance, and the study used a set of financial ratios
number 32 ratio to be used in the proposed method for evaluating performance, and these ratios
were divided into four groups reflect each group aspect of Performance Company( indicators to
measure liquidity, indicators to measure the profitability of activity ,indicators to measure the
profitability of investment, indicators to measure the technical provisions )and has been the values
of these ratios calculated according to the financial statements extracted from the financial
statements of insurance companies during the period from 1982 to 2001, has been conducting

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analysis Cluster on these ratios in order to divide the companies under study into three
groups(strong performance - medium performance - weak performance)

Study (Hussein Hassani: 2007) The problem of this study is to measure the performance of -3
-:the insurance companies in Algeria indicators
This study aimed to the knowledge of performance measurement criteria and how to apply it ,  
the researcher depended in this study to use the approach of " a case study" through its reliance
on documents Foundation and various dialogues with key personnel of the National Insurance
.Company
the study concluded that the National Insurance Company has not yet reached to the required
level of performance, at least to some of its resources ,and suffers somewhat from a deficit with
.regard to the quality of services provided to its customer

4-And study (Boubakri Dionne, and Namara Triki ,2008) examine the long run performance of
M&A transactions in the property- liability insurance industry.
Specifically, they investigate whether such transactions create value for the bidders shareholders,
and assess how corporate governance mechanisms, internal and external, affect such
performance.
The results show that M&A create value in the long run as buy and hold abnormal returns are
positive and significant after 3 years.
While tender offers appear to be more profitable than mergers, the evidence does not support the
conjecture that domestic transactions create more value than cross-border transactions.
Furthermore, positive returns are significantly higher for frequent acquirers and in countries
where investor protection is weaker.
Internal corporate governance mechanisms, such as board independence, and CEO share
.ownership, are also Significant determinants of the long run positive performance of bidders
5- study (Saleema, 2009) Assessing the financial performance of insurance companies using the
financial ratios: A case study in the Algerian insurance company
Insurance companies are part of the important non-bank financial institutions, and to ensure its
continuity they must impose control of their financial performance, through the evaluation based
on an ongoing basis using multiple methods especially the financial analysis with its various
financial tools and methods.
Evaluate the financial and economic performance of the Jordanian )Yasser Taamna: 2009 ( -6
Islamic insurance companies compared with commercial insurance companies under
-:contemporary financial crisis period
The study problem: What is the financial and economic assessment of the Islamic insurance
companies compared to traditional insurance companies in Jordan in light of the global financial
crisis? The study aimed to demonstrate the impact of the global financial crisis on Islamic
insurance companies operating in Jordan companies compared to conventional insurance
.companies

7
The study used financial analysis of the vertical and horizontal proportions of Finance to evaluate
the performance of insurance companies, represented by the Islamic Insurance Company of
Jordan, compared with a sample of commercial insurance companies of the Arab Jordanian
Insurance Group and the Arab Orient Insurance before the financial crisis, during a statement to
the effect of the crisis on the financial performance of those companies. Economic analysis was
used to assess the impact of the crisis on employment and economic performance of the insurance
companies. The study concluded that the financial performance of traditional insurance companies
is better than the Islamic insurance companies before the crisis in all ratios except ownership
.percentage
As for their performance during the financial crisis, the financial performance of the Islamic
insurance companies was better than the performance of traditional insurance companies in all
.ratios except the rate of return on assets and fixed assets
The study concluded that the financial performance of traditional insurance companies were
better than of the Islamic insurance companies before the crisis in all ratios except ownership
.percentage
But during the financial crisis, the financial performance of the Islamic insurance companies was
better than traditional insurance companies in all ratios except the rate of return on total Return,
.on assets and fixed assets
Results of the study also showed that the economic performance of traditional insurance
companies was better than the performance in Islamic insurance companies before and during the
global financial crisis

7- study (Sameer & Yahya, 2012) Factors Affecting the Financial Performance of Jordanian
Insurance Companies Listed at Amman Stock Exchange
This study aimed at investigating the factors that mostly affect financial performance of
Jordanian Insurance Companies. The study population consisted of all insurance companies'
enlisted at Amman stock Exchange during the period (2002-2007) which count (25) insurance
company. The results showed that the following variables (Leverage, liquidity, Size, Management
competence index) have a positive statistical effect on the financial performance of Jordanian
Insurance Companies. The researcher recommended that a high consideration of increasing the
company assets will lead to a good financial performance and there is a significant need to have
highly qualified employees in the top managerial staff.

Comment on the previous studies :1.2

These studies are applied in different foreign environments and there is no local studies adopt this
.issue from the side of analysis and assessing the insurance companies financial performance
the majority of the previous studies discussed the flowing issue from many other aspects for
example the study of Alfred Tangert aimed to determine the types and measures for insurance
companies ,but the study of Boubakri Dionne examine the long run performance of M&A
.transactions in the property- liability insurance industry
they investigate how corporate governance mechanisms, internal and external, affect such
.performance
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And the study ofr Sameer & Yahya aimed at investigating the factors that mostly affect financial
.performance of Jordanian Insurance Companies
They recommended that a high consideration of increasing the company assets will lead to a good
financial performance and there is a significant need to have highly qualified employees in the top
.managerial staff
The study of Saleema recommended that insurance companies are part of the important non-
bank financial institutions, and to ensure its continuity they must impose control of their financial
performance, through the evaluation based on an ongoing basis
The study of Hussein Hassani aimed to the knowledge of performance measurement criteria and
how to apply it through the reliance on documents foundation and various dialogues with key
.personnel of the Insurance Company
The study concluded that the National Insurance Company (case study) has not yet reached to the
required level of performance, at least to some of its resources ,and suffers somewhat from a
.deficit with regard to the quality of services provided to its customer
And The study of Muhammad knew aims to use cluster analysis method to evaluate the
performance of the insurance companies operating in the Egyptian market in order to divide the
companies under study into three groups(strong performance - medium performance - weak
performance). This study is differs by its focusing on financial analysis indicators based on the
nature and privacy of the insurance activity trying to reflect the real financial position of the
company, especially that the insurance sector can be one of the pillars of the national economy
.through its dual role played by the national economy
The main reasons for the weakness of the insurance activity in Palestine are the lost of trust in the
insurance services from the customers side and the focused on the vehicle insurance from the
.other side (insurance companies)

SECTION /3.1 ((Introduction to insurance companies))

Insurance definition -3.1.1

Insurance provides economic protection from identified occurring risks discovered within a ●
.specified period

The Palestinian Law No. 20 of 2005 defining the insurance contract that it is any agreement or ●
pledge committed the insurer leads to the insured or the beneficiary party who spoke on
condition of insurance in favor of a sum of money, salary or any other financial award as
contracted, in the event of identified risks occurring within a specified period

Sources of the insurance operations : 3.1.2

Each company from the insurance companies tend to attract customers, especially in the presence
of competition in the insurance market; the success of the insurance company depends on the size
of the insurance operations received. Insurance companies use various advertising campaigns such
9
as advertising in video and audio devices, newspapers and magazines, in addition to providing
some various insurance benefits for customers, and there are number of ways to achieve contact
between the company and the its customers (insureds)

:Direct contact with the company -1

An insurance policy between the insured and the company at the company's headquarters or one
.of its subsidiaries, without the need of a broker

: Company contact through intermediaries (agents) -2

In this way the insurance company contracted with mediators called "agents" or "delegates" or
"Insurance Brokers", by delegated them to represent the company
and marketing its insurance activities within their geographical area and signature insurance
:policies with customers, for a commission all insurance policies produced by, agents of two types

A. agents Delegates full authorization

According to the agency contract signed with the company, these agents are entitled to
collect premiums from the customers, and to signature and extract the receipts to prove it
The agents do not bear any responsibility if any customers payments of premiums
.have delayed

B) agents Delegates not full authorization

This type of agents is determined by its relationship with the insurance company to bring
customers, without giving them any authority to make contracts and then not authorized to
.collect or generate premiums from customers

:Other insurance companies contact with the company -3

In this case the insurance companies accept transferred operations from other insurance
.companies
Types of insurance services according to the Palestinian Insurance :3.1.3
Federation(http://www.pif.org.ps)

Fire Insurance -1

General Accident Insurance -2

Insurance responsibilities -3

Marine Insurance-4

Engineering Insurance-5

Health insurance-6

specialist insurance-7
10
History and current role for insurance company in Palestine -3.1.4

Palestinian National Authority embarked in 1993 to oversight the insurance industry, and the
expansion of the geographical scope of its responsibility for the sector in 1994. Under the transfer
of powers agreement, Palestinian National Authority authorized to become a legal entity to
supervising the field of insurance, including believers and agents license and supervise their
activities, the Palestinian laws have kept the absolute compensation system mandatory for
.victims of road

Despite the gains achieved by the Palestinian insurance sector in the recent years which reached .
more than $ 104 million, However, that this sector has ranked as a new in Palestine and still
primitive and simple. It is still possible to create great investment market in the coming years if the
competent authority succeeding to lead the insurance sector to become one of the basic national
.economic sectors

Experts participating in the first Palestine Conference for insurance which opened on Tuesday,
06/29/2010 at the city of Jericho, agreed unanimously that the insurance sector in Palestine is still
primitive and simple, and retracted only in the field of vehicle insurance, and there is no other
insurance types, despite the fact that there are dozens of types of insurance that can invest in
.Palestine

The insurance sector has suffered from the absence of legislation, oversight mechanisms,
government control, chaos of work and poor insurance trust for a long time, until the established
of the Palestinian Capital Market Authority which became the legally authorized agency for the
supervision, regulation and control over the business sector in late 2004 supported by the issuance
.of Insurance Law No. (20 ) for 2005 in the reorganization of the insurance sector

At the level of development of the legal and regulatory framework for the insurance sector, the
Palestinian Capital Market Authority received support to review its legal and regulatory
framework for the insurance sector, based on the fundamental principles of insurance "(Insurance
Core Principles)" ICPs issued by the International Association of Insurance Supervisors (IAIS),
where the project was designed to assess the legal and regulatory framework for the insurance
sector in Palestine with those principles and determine the requirements in order to achieve the
harmonization between them. It should be noted that this project is funded by the World Bank
cooperating with the Arab Forum of bodies to supervise and control the work of the insurance
project which includes beside the Palestinian Capital Market Authority's regulatory bodies on the
...insurance sector in all of Libya, Tunisia, and Morocco

The number of the insurance companies that are licensed to operate by the Palestinian Capital
Market Authority are ten companies at the end of the 2013 which engaged in various types of
insurance, while total insurance sector investments accounted for 2.65% of the estimated GDP at
the end of the 2013, representing approximately insurance portfolio of 159 million dollars at the
.end of the 2013 employing no more than 1100 employees in 217 subsidiaries

11
 Section 3.2 )( Financial Performance Evaluation)).
First: Financial performance : the financial performance focuses on the use of financial indicators
to measure the achievement of objectives and the financial performance reflects the performance
of companies, and contributes to the Find of financial resources and provide the Company with
investment opportunities in various fields of performance and that help meet the needs of
stakeholders and achieve their goals (Mansour and Shehda, 2003:296).

3.2.1:The Objectives of financial performance for investors :

1. To enable the investor to follow up and find out the company's activity and nature ,and also
helps them to pursue economic and financial circumstances and evaluate the impact of the
financial performance of the profitability , liquidity , activity , indebtedness tools and
dividends on the share price.
2. To assist the investor in a process of analysis and comparison and interpretation of financial
statements and understand the interaction between the financial statements to make
decisions appropriate to the situation of companies. (al-Khatib, 2009: 47,45).

3.2.2: Steps to evaluate financial performance.

1. Obtain the financial statement and income statement ,and then use evaluation steps to
prepare the budgets , financial statement and financial report that related to companies
performance during a certain period .
2. Take difference metrics to evaluate the performance such as profitability and liquidity
ratios, financial activity and dividends that by prepare and test the financial instruments
that use in evaluate the financial performance.
3. To study and evaluations of ratios, and after extraction results can find the distractions and
see the differences and weaknesses in the actual financial performance by comparing
performance or expected performance of comparable companies operating in the same
sector.
4. Make appropriate recommendations based on the process of evaluation the financial
performance through ratios, after finding out the reasons for these differences and their
impact on companies to deal with and processed (Nofal, 2002:23)

3.2.3:Financial performance with financial ratio measurements :

The financial ratios that derived from financial statement are aim to provide more important
information about the liquidity and profitability , where the debt holders are interested in
liquidity ratios which show the company's ability to meet its obligations, while investors and
shareholders interested in profit rates. The preparation of the annual financial reporting
process for companies must take the concept of disclosure, which refers to the quality of data
that is disclosed by focusing on the appropriate information to make decisions.

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 This type of disclosure displays all the financial ratios that meet the general-purpose of data
users, whether lenders or investors. One of the most important financial ratios traded in the
financial reports with the public shareholding companies Return on common stock, common
stock dividends, book value per ordinary share, net working capital, return on equity, the
operating profit, the trading ratio , the ratio of debt to equity and return on assets . (al-Khatib,
2009:56,54).

3.2.4: the concept and definition of performance evaluation:

Evaluation of the performance as a concept means a group of studies, which aimed to identify
the extent of the capacity and efficiency of the economic unit from its activities in the
management of various administrative and production, technical, marketing and planning
aspects ... etc. through a specific periods.

Definition of performance evaluation as a "measure the performance of the economic unit

activities as a combined based on the results provided at the end of the accounting period
which is usually one calendar year and find out the reasons that led to the above results and
provide solutions to get to the good performance in the future. (Jaber, 2006 :16)

3.2.5: the importance of performance :

1. Ensure efficient allocation and use of productive resources as best.

2. The importance of performance evaluation is closely planning at all levels, whether at the
national level or the sector level or the level of the organization, as the result of
performance evaluation to ensure the achievement of economic balance and coordination
between economic growth sectors.
3. Performance evaluations discover the disadvantages of excessive money in the procedures
and formalities which is incompatible with the proper public rules for the companies .
4. Performance evaluation work to find some kind of competition between the various
sections of the economic unit works which contribute to improving the performance level
of the companies.
5. The performance evaluations process helps to disclose the appropriate degree of and
harmony between objectives and strategies and their relationship to the competitive
environment of economic unit . (Kazzaz, 2009 :19).

3.2.6: The objectives of performance evaluation:

1. Know the level of achievement of the economic unit of the functions entrusted with
performed compared to those posts listed in the plan.
2. Stand over the efficient use of available resources in a rational manner that return less the
costs of the largest and highest quality

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 3. Disclosure of the strengths and weaknesses in the economic unit performance e by the
comprehensive analysis of statement for the purpose of establishing the necessary
correcting and solutions for it .
4. Determine the responsibility of each center or department in the economic unit for the
defects and weaknesses of the activity carried out by measure productivity of each section
of the production process sections and identify achievements positively or negatively .
5. Correct planning budgets and put there indicators in the path that strike a balance between
ambition and possibilities .
6. Provide data and information base for the economic unit performance, to help policy-
making and students and future research that works to improve the performance patterns
and raise its efficiency.
7. Ensuring that the economic balance and coordination between the different sectors of the
economy, productivity, or do develop science policy by setting standards or ratios or levels
determine in advance how to exploit the resources and facilities as efficiently and invested
in the best investment .

3.2.7: performance evaluation indicators:

The essence of the performance evaluation process is the actual performance indicators and
specific criteria for comparing and there are many indicators to diagnose deviations and their
causes and suggest the necessary steps to deal with it.

The main indicators used in the process of evaluating performance:

1. General or common indicators : Are indicators that can be guided by them in the general
assessment of the economic unity of different types and these indicators including what is
internal indicators such as production, marketing , productivity , individuals and
effectiveness, including what is external, such as economic, social, political and
environmental indicators.
2. Special indicators :are Indicators that are closely linked to the privacy of unity and economic
activity indicators depends on data and information and its accuracy and availability .

Official sources approved in the extraction of information on performance indicators:

accounting systems, statistical systems, planning budgets, closing statements, production
reports, national accounts, the female students of economic feasibility, research and students
and reports adopted, viewing field.

There are a large number of financial indicators used in the performance evaluation, but the
most important of these indicators and the most common ones can be classified into four
branches Head are: indicators of profitability / liquidity indicators / capital indicators /
indicators of employed funds .

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 Section 3.3 / ((Financial statement analysis((

Financial analysis is the tool of finance. With financial analysis, company can know its operation
financial position’s strength and performance. It can also be compared with other companies
.financial statements

Only after financial analysis, the decision maker in insurance company can use financial
statements for decision making. This financial information is useful for planning, For example; we
.can estimate our future ability of earning

:Definition of financial statement analysis :3.3.1

Financial statement analysis is an evaluative method of determining the past, current and
projected performance of a company and refers to an assessment of the viability, stability and
profitability of a business. (cottrel:2009,12)

Several techniques are commonly used as part of financial statement analysis including horizontal
analysis, which compares two or more years of financial ; vertical analysis, where each category of
accounts on the balance sheet is shown as a percentage of the total account; and ratio analysis,
which calculates statistical relationships between data. (Gorge:2007,18)

:Objectives of Financial statements Analysis :3.3.2

.To understand company’s position and performance better .1

.To know the trend of business sale, purchase, profit, assets and investment .2

It is helpful to estimate future earning, interest, strength to repay the loans by explaining the .3
.meaning of financial data

Because in financial statement both analysis and interpretation are included, so, financial .4
.analysis can understand general public, too

Importance of financial statements analysis:: 3.3.3

The financial statement analysis is important as it provides meaningful information to the -1

.shareholders in making any decisions

Financial statement analysis is important to the company's management , for making decisions -2

.and formulating plans and policies for the future

The financial statement analysis provides important information to The creditors, to providers -3

loan capital or not to the company

The financial statement analysis is important to  investors , because they can obtain useful -4
 .information for their investment decision

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3.3.4:Tools of Financial statements Analysis:-

1-Financial statement Analysis

In financial statement analysis there is tool that using in financial analysis in which can create and
highlight significant relationships between different items in financial statement, Two type of
financial statement analysis are very important One is horizontal analysis and second is vertical
analysis.

In horizontal analysis, we compare all items of balance sheet and profit and loss account with
previous years' balance sheet and profit and loss account's items.

In vertical analysis, we convert each element of the information into a percentage of the total
amount of statement so as to establish relationship with other components of the same
statement.

2- Ratio Analysis

Ratio analysis is based on fact, if we create relationship between two accounting figures, we can
get useful information relating to performance, strengths and weakness , We calculate different
ratios like revenue ratios, balance sheet ratios and mixed ratios. (Christensen:2010,115)

For example, we know that according to rule of accounting , debt equity ratio should not more
than 2:1 because it is risky. As an investor, we calculate debt -equity ratio before invest our money
in the form of debt. Here are two company and we have calculated its debt equity ratio.

We see the debt equity ratio of B Co. is more than our rule of accounting . So, we should invest in
company A's debentures.

3.3.5:Financial analysis for insurance company :-

There are many factors to examine when looking at insurance companies.

More than anything, both consumers and investors should concern themselves with the insurer's
financial strength and ability to meet ongoing obligations to policyholders.

16
Poor fundamentals analysis not only indicate a poor investment opportunity, but also hinder
growth. Nothing is worse than insurance customers discovering that their insurance company
might not have the financial stability to pay out if it is faced with a large proportion of claims

3.3.6:Key Ratios for insurance company:-

 Liquidity analysis

Current Ratio:
Current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations.
The ratio is mainly used to give an idea of the company's ability to pay back its short-term
liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The
higher the current ratio, the more capable company to paying its obligations.

 Underwriting ratios
Loss rate Ratio: The amount of a company's net premiums that were allocated to
underwriting costs, like commissions to agents and brokers, state and municipal taxes,
salaries, benefits and other operational expenses. This ratio is determined by dividing the total
underwriting expenses by net premiums earned. It is the measure of an insurer's business
efficiency to investor, the lower the Loss rate ratio, which indicates the company is more
efficient.

 Expense Ratio: It is a measure of what it costs an investment company to operate a

mutual fund An expense ratio is determined through an annual calculation, where a
fund's operating expenses are divided by Net premium.
 Combined Ratio: Combined ratio is the addition of loss ratio and expense ratio ,which
shows in together how an efficient insurance company is to select the policy as well as
control the underwriting expense. The lower the ratio the better efficiency it indicates.
 Profitability ratios
Return on Revenue:
It is a measure of a corporation's profitability that compares net income to revenue.
Return on revenue is calculated by dividing net operating income by revenue, This
ratio indicates on the total revenue earned what portion is turning into profit. The
higher the ratio the better it is for the company
Return on Equity Capital (ROE)
This ratio measures how much profit the shareholder’s investment has generated.
A higher ROE percentage indicates that shareholders are receiving a better return on
their investment.
Return on Assets (ROA)
This ratio measures how profitable a company is relative to its total assets. A high ROA
indicates that management is effectively utilizing the company’s assets to generate profit.
17
 Investment Yield:
It indicates how much the company is earning from investment against its investment.
Company would like earn higher income on lower amount of investment. So, lower the ratio
better investment efficiency it indicates .

Leverage ratio
Debt to Equity Ratio
It measure of a company's financial leverage calculated by dividing its total liabilities
by stockholders' equity. It indicates what proportion of equity and debt the
company is using to finance its assets. A high debt/equity ratio generally means
that a company has been aggressive in financing its growth with debt.
Market ratios

Price Earnings Ratio:

A valuation ratio of a company's current share price compared to its per-share earnings. In
general, a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole
story by itself. It's usually more useful to compare the P/E ratios of one company to other
companies in the same industry, to the market in general or against the company's own
historical P/E.(Barker:2014,60)

Market Value to book value

This ratio indicates according to the record of the company what should be value of each share.
Book value of share changes as per number share changes. If market value is greater than book
value the ratio will be greater than 1. On the other hand in opposite case, when the ratio is
lower than 1, it indicates the company reputation and shareholder expectations in the market
is not favorable.

18
 CHAPTER3/((PRACTICAL FRAMEWORK))
Introduction:-
Effective performance evaluation increases the social benefits and enhances the accountability at
the enterprise level.
This chapter evaluates the performance of "Trust insurance company" in Palestine, during the
period 2012 to 2014, Both primary and secondary data have been used here.
This study will indicates that the overall performance of the enterprise had been more or less
satisfactory during the period.
The operational will determine performances profitability, activity , ,solvency , liquidity and
satisfactory for the financial performances.
Finally after this chapter we will suggests for Trust company to continuous growth and
development.
Key words: Liquidity, Activity, Solvency, Profitability, Productivity.

3.1: brief description about trust insurance company:-

Trust Insurance Company - Palestine was founded in 1994 in Gaza Hashim as Private shareholding
.limited company and its capital amounted five million dollars paid in full
and then in a very short period of time its open branches for the company in all major cities in
.Palestine, and the center of the key processes in Ramallah "West Bank" in 1995
The year-by-year Trust began to paint a lasting success stories to invest in the amount of 16 million
shekels outside the insurance sector to support the economy and also the variety of public sources
.of income for the company
The company vision and mission
The vision that aspires Trust Palestine to become the first choice for any consumer, as the Trust is
the result of accumulated experience over decades established through a stock of knowledge and
experience and prepared her all the possibilities and mobilized all her energies and determined to
achieve in practice during the next phase, are working on that we take leadership insurance
market Palestinian like selecting the first for any consumer to get it all through the power and
reputation and service quality and speed requirements and deployment and the type of goods and
quality performance to Category I in production and profits and expansion and the number of
.goods and kind and shareholders' equity and customer satisfaction

activates of trust insurance company : 3.2

Trust insurance company provide the following activates

 Vehicles Insurance
 Fire Insurance
 Construction Architect
 Liability Insurance
 Marine Insurance
 Health and Life Insurance
 Individual Insurance
 Other Insurance
19
-:analysis, evaluation and discuss the results :3.3
finantial statement analysis:3.3.1
Horizontal analysis --
TRUST INTERNATIONAL INSURANCE Consolidated Statement of Financial Position for the end Dec,2014
Horizontals analysis
Asset 2014 % 2013 % 2012 %
Non- current assets
Property and equipment 1136084 97.09% 1181580 100.98% 11701100 100.00
4 4 %
Real estate investments 5430983 100.00% 5430983 100.00% 5430983 100.00
%
Available-for-sale investment 3007798 144.57% 2370057 113.92% 20804522 100.00
9 5 %
Deferred tax assets 1429214 117.89% 1370263 113.02% 1212375 100.00
%
Checks under collection due after one year 422527 475.96% 549251 618.71% 88774 100.00
%
Total non-current assets 4872155 124.17% 4286687 109.25% 39237754 100.00
7 6 %

Current assets :
Account Receivables 1057972 115.64% 1043114 114.01% 9149062 100.00
5 2 %
Insurance and reinsurance companies Receivable 556090 1048.08% 577980 1089.34% 53058 100.00
%
Reinsurance contracts assets 1229650 91.92% 1102915 82.45% 13376698 100.00
8 1 %
Other current assets 910951 82.55% 1074212 97.35% 1103476 100.00
%
Checks under collection due within a year 7358539 149.33% 7024767 142.55% 4927811 100.00
%
Cash and cash equivalents 1383152 121.83% 1174189 103.42% 11353199 100.00
7 1 %
Total current assets 4553334 113.94% 4187914 104.79% 39963304 100.00
0 3 %
Total assets 9425489 119.01% 8474601 107.00% 79201058 100.00
7 9 %

Liabilities and equity

Non-current liabilities
Provision for employees indemnity 1992433 108.1% 1830446 99.28% 1843793 100.00
%
Total non-current liabilities 1992433 108.1% 1830446 99.28% 1843793 100.00
%

Current liabilities:
Provision of taxes 4142192 145.40% 3739779 131.27% 2848903 100.00
%
account payables 3102180 131.90% 1748122 74.33% 2351866 100.00
%
Insurance and reinsurance companies payable 1145844 30.98% 1270754 34.36% 3698450 100.00
%
other current account 4899409 94.49% 5337690 102.94% 5185281 100.00
%
Credit facilities 556149 - -

20
Deferred tax liabilities 1357008 2452399 -
Insurance contracts liabilities 4118366 112.30% 4075201 111.12% 36673377 100.00
7 9 %
Total current liabilities 5638644 111.09% 5530076 108.95% 50757877 100.00
9 3 %
Total liabilities 5837888 110.98% 5713120 108.61% 52601670 100.00
2 9 %
Equity
Paid-in share Capital 1000000 100.00% 1000000 100.00% 10000000 100.00
0 0 %
Statutory reserve 2399525 128.34% 2163289 115.71% 1869596 100.00
%
Optional reserves 2347553 129.16% 2111317 116.16% 1817624 100.00
%
The cumulative change in the fair value 1752111 155.14% 1062227 94.05% 11293778 100.00
6 3 %
Retained earnings 3607821 222.93% 2717931 167.94% 1618390 100.00
%
Total equity 3587601 134.88% 2761481 103.82% 26599388 100.00
5 0 %
Total liabilities & equity 9425489 119.01% 8474601 107.00% 79201058 100.00
7 9 %

the basic year When conducting a horizontal analysis, it is useful to conduct the analysis for all of
the financial statements at the same time, so that we can see the complete impact of operational
.results on a company's financial condition over the review period
Assets
We noted in Trust insurance company assets in balance sheet that there is material changes,
Notably that Available-for-sale investment is increase about 40% to the basic year (2012)that is
mean trust insurance company have High-efficient management that help in good decision-making
also increase in Checks under collection over three years that increase about 300% in 2014 to but
. its decrease about 150 % in 2014

Liabilities

As We note that material changes in Short/Current Long Term Debt item , which mean there is
material decline& increase between period"2012-2014" for Trust insurance company that is
because there is effective managements Working toward Decreasing the liability , but increase the
liability because of increased liability for any firm or any individual in the normal course of business
or other activities may negligently cause damage to the property of others or injury to others, if so
.insurer compensate insurance policy holder
Owners equity

The value of investments affected by the increase in the amount of 6.8 million US dollars as a
result of higher fair value that is mean there is increase in2014 by 50% to2013 , and there increase
.in return earnings by 60% in year 2014 to year 2013

-:Vertical analysis--
21
 TRUST INTERNATIONAL INSURANCE Consolidated Statement of Financial Position for the end Dec,2014
Vertical analysis
Asset 2014 % 2013 % 2012 %
Non- current assets            
Property and equipment 11360844 12.05% 11815804 13.94% 11701100 14.77%
Real estate investments 5430983 5.76% 5430983 6.41% 5430983 6.86%
Available-for-sale investment 30077989 31.91% 23700575 27.97% 20804522 26.27%
Deferred tax assets 1429214 1.52% 1370263 1.62% 1212375 1.53%
Checks under collection due after one year 422527 0.45% 549251 0.65% 88774 0.11%
Total non-current assets 48721557 51.69% 42866876 50.58% 39237754 49.54%
 
Current assets :  
Account Receivables 10579725 11.22% 10431142 12.31% 9149062 11.55%
Insurance and reinsurance companies Receivable 556090 0.59% 577980 0.68% 53058 0.07%
Reinsurance contracts assets 12296508 13.05% 11029151 13.01% 13376698 16.89%
Other current assets 910951 0.97% 1074212 1.27% 1103476 1.39%
Checks under collection due within a year 7358539 7.81% 7024767 8.29% 4927811 6.22%
Cash and cash equivalents 13831527 14.67% 11741891 13.86% 11353199 14.33%
Total current assets 45533340 48.31% 41879143 49.42% 39963304 50.46%
100.00 100.00
Total assets 94254897 100.00% 84746019 79201058
% %
Liabilities and equity
Non-current liabilities  
Provision for employees indemnity 1992433 2.11% 1830446 2.16% 1843793 2.33%
Total non-current liabilities 1992433 2.11% 1830446 2.16% 1843793 2.33%
   
Current liabilities:  
Provision of taxes 4142192 4.39% 3739779 4.41% 2848903 3.60%
account payables 3102180 3.29% 1748122 2.06% 2351866 2.97%
Insurance and reinsurance companies payable 1145844 1.22% 1270754 1.50% 3698450 4.67%
other current account 4899409 5.20% 5337690 6.30% 5185281 6.55%
Credit facilities 556149 0.59% -   -  
Deferred tax liabilities 1357008 1.44% 2452399 2.89% -  
Insurance contracts liabilities 41183667 43.69% 40752019 48.09% 36673377 46.30%
Total current liabilities 56386449 59.82% 55300763 65.25% 50757877 64.09%
Total liabilities 58378882 61.94% 57131209 67.41% 52601670 66.42%
     
Paid-in share Capital 10000000 10.61% 10000000 11.80% 10000000 12.63%
Statutory reserve 2399525 2.55% 2163289 2.55% 1869596 2.36%
Optional reserves 2347553 2.49% 2111317 2.49% 1817624 2.29%
The cumulative change in the fair value 17521116 18.59% 10622273 12.53% 11293778 14.26%
Retained earnings 3607821 3.83% 2717931 3.21% 1618390 2.04%
Total equity 35876015 38.06% 27614810 32.59% 26599388 33.58%
100.00 100.00
Total liabilities & equity 94254897 100.00% 84746019 % 79201058 %

Vertical analysis of financial statements is a technique in which the relationship between items in
the same financial statement is identified by expressing all amounts as a percentage a total
amount. This method compares different items to a single item in the same accounting period.

22
The financial statements prepared by using this technique are known as common size financial
statements.( www.readyratios.com)
Balance Sheet:
When applying this method on the balance sheet, all of the three major categories accounts (i.e.
assets, liabilities, and equity) are compared to the total assets. All of the balance sheet items are
presented as a proportion of the total assets. These percentages are shown along with the
absolute currency amounts.
- Assets
We noted in trust assets there is approximately stable increases and decreases in ratio but
there is relatively increase in "available for sale investment".
- Liability and equity
Also liability and equity in Trust insurance company have relatively stable ratio but there is
decrees liability" Insurance contracts liabilities" from 48% in 2013 to 43% in 2014, that is
means trust company have strong policies and management work to decreases its liability.

evaluation ,analysis by using ratio analysis :3.4

Dec 31, 2012 Dec 31, 2013 Dec 31, 2014 Ratio Description Serial
Ratio .no
liquidity Ratio:3.4.1
Current Assets /Current Current Ratio .1
0.7597 0.7330 0.8075 Liabilities

cash and cash equivalent+ (

1.7597 1.7330 1.8075 /)Receivable Quick Ratio .2
Current Liabilities

Total Debt /Stockholders’ Debt to Equity

1.91 2.07 1.63 Equity .3
Ratio
underwriting Ratio:3.4.2
Underwriting expenses /
72.77% 52.66% 69.28% premiums earned Loss Rate Ratio .4
/operating expenses
0.93% 0.55% 0.62% Net premium Expense Ratio .5
Loss Rate Ratio +
73.69% 53.21% 69.91% Expense Ratio Combined Ratio .6

profitability Ratio:3.4.2

2.16% 3.47% 2.51% Net Profit/Total Assets Return on Asset .7

4.78% 6.61% 5.26% Net income /Revenue Return on .8

23
 Revenue
Net Profit-preferred Return on
6.18% 10.64% 6.58% /Common Equity .9
Equity
market Ratio:3.4.3
price per share /
earnings per share Price Earnings
15.29 8.62 10.42 .10
(EPS) Ratio

/Book value of firm Market Value to

0.98 0.91 0.70
Market value of firm .11
book value

Trust insurance company

3.4.1:liquidity Ratio :-
1-Current Ratio
TRUST INTERNATIONAL INSURANCE , Current Ratio
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Current assets 45533340 41,879,143 39,963,304
Current liabilities 56,386,449 57,131,209 52,601,670
Ratio
0.807
Current ratio 5 0.7330 0.7597

Liquidity ratios basically define how, in this case, the Trust insurance Company can meet its Short
-Term obligations, (debt and payables) with its short-term assets (premiums, receivables).
Trust insurance company current ratio deteriorated from 2012 to 2013 but then improved from
2013 to 2014 not reaching 2012 level, The higher the current ratio, the more capable the company
is of paying its obligations, but in the Trust company current liabilities exceed current assets (the
current ratio is below 1), then the company may have problems in meeting its short-term
obligations.

2-Quick ratio
TRUST INSURANCE CO , Quick Ratio

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012

Selected Financial Data (USD $ )
Cash and cash equivalents 45,533,340 41,879,143 39,963,304
Account Receivables 56,386,449 57,131,209 52,601,670

24
Total 101,919,78 99,010,352 92,564,974
Current liabilities 56,386,449 57,131,209 52,601,670
Ratio
Current ratio 1.81 1.73 1.76
Its type of liquidity ratio calculated as (cash plus short-term marketable investments plus
.receivables divided by current liabilities)
In trust insurance company we noted there is increase in cash and receivable from 2012- 2014 on
the other side increase in current liabilities may be because increase the operation of Trust
company from year2012-2014 that is mean there is effective use of available recourses by
management, in general Quick ratios are approximately records stable decrease and increase
.indicating a relatively strong liquidity position

Debt to Equity ratio -3

Trust company ., Debt to Equity Ratio
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Total liabilities 58,378,882 57,131,209 52,601,670
Stockholders' equity 35,876,015 27,614,810 27,599,388
Ratio
Debt to Equity 1.63 2.07 1.91

. This ratio calculated as total debt divided by total shareholders' equity

While Debt/Equity decrease from (1.91) in 2012 to (1.63) in 2014. Indicating that Trust insurance
.company depends in part, upon the issuance of debt to fund its operations and commitments
The debt to equity ratio identifies companies that are highly leveraged and therefore a higher risk
for investors. A high debt/equity ratio generally means that a company has been aggressive in
.financing its growth with debt

3.4.2:Underwiting Ratio :-

1- loss rate ratio

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Net claim 24,989,763 17,604,184 17,904,184
premiums earned(net) 36,068,576 33,429,028 24,604,935
Ratio
Loss rate ratio 69.28% 52.66% 72.77%

calculates the loss ratio by dividing loss adjustments expenses by premiums earned. The loss ratio
shows what percentage of payouts are being settled with recipients. in Trust insurance company
there is decreases in loss ratio from 73% 2012 to 53% 2013 The lower the loss ratio the better for
25
the company , but there is increases from 53% 2013 to 70% 2014 which mean Higher loss ratios
may indicate that an insurance company may need better risk management policies to guard
against future possible insurance payouts.

2- Expense Ratio

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012

Selected Financial Data (USD $ )
operating expense 2,252,35 1,842,48 2,284,170
premiums earned(net) 36,068,576 33,429,028 24,604,935
Ratio
Expense ratio 0.62% 0.55% 0.93%

calculates the expense ratio of an insurance company by 'dividing underwriting expenses by net
premiums earned. Underwriting expenses are the costs of obtaining new policies from insurance
carriers , expense ratio measures an insurer's efficiency. The lower the expense ratio the better
because it means more profits to the insurance company.

3- Combined Ratio
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Net claim + expenses 25,214,998 17,788,432 18,132,601
premiums earned(net) 36,068,576 33,429,028 24,604,935
Ratio
Combined ratio 69.91% 53.21% 73.69%

This figure just measures claims losses and operating expenses against premiums earned. The
lower the figure the better.
A ratio below 100 % represents a measure of profitability and the efficiency of an insurance firms
underwriting efficiency. Ratios above 100 % denote a failure to earn sufficient premiums to cover
expected claims in Trust insurance company combined ratio is approximately records stable
decrease and increase indicating a relatively strong underwriting position.

3.4.3:profitability ratio
1- Return on Asset
Trust co., Return on Assets
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Net income 2,362,362 2,936,927 1,706,788
Total assets 94,254,897 84,746,019 79,201,058
Ratio
Return on assets 2.51% 3.47% 2.16%

26
2-Return on revenue
Trust co., Return on Revenue
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Net incme 2,362,362 2,936,927 1,706,788
Total revenue 44,910,187 44,430,797 35,728,358
Ratio
Return on Revenue 5.26% 6.61% 4.78%

ROE and ROA are both increased from 2012 to 2013 but decreased in 2014. This is a result of the
lower net profit in 2014 ($2362362) compared to $2936927 in 2013 which caused by different
reasons the higher taxes, the higher direct branches expense, higher claims outstanding paid. And
also based on the statement of financial position it's clear that Trust company assets increased
materially. Also that may reflect the insufficient use of existing property and equipment, and long
and short-term debts are too high. Trust insurance company needs to find ways to improve these
.areas in order to obtain respectable Profit Margins and ROA

3-Return on equity

Trust co., Return on Equity

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Net income 2,362,362 2,936,927 1,706,788
Stockholders' equity 35,876,015 27,614,810 27,599,388
Ratio
Return on equity 6.58% 10.64% 6.18%

Return on equity measures a company profitability by revealing how much profit a company
generates with the money shareholders have invested. Also known as "return on net worth"
.(RONW)
The Return on Equity (ROE) is higher than ROA. But ROE of 2014 to less compared to 2013 that’s
means that Trust insurance company used its debt ineffectively so that net income is decreasing
.while Common Equity is increasing

3.4.4: Market ratio

1-Price Earnings Ratio

Trust co .,Price earnings ratio

Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Stock price 2.5 2.5 2.6
earnings per share 0.24 0.29 0.17

27
 Ratio
The price-earnings ratio 10.42 8.62 15.29

The P/E ratio is equal to a stock's market capitalization divided by its after-tax earnings over a 12-

month period, usually the trailing period but occasionally the current or forward period
The higher the P/E the more the market is willing to pay for the company’s earnings, however it
can also indicate the market has high hopes for this stock’s future and has bid up the price
Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean this is
a sleeper that the market has overlooked.

2- Market Value to book value

Trust co., Market value to book value
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (USD $ )
Market Value 35,876,015 28,614,810 26,599,388
book value 25,000,000 25,000,000 26,000,000
Ratio
Market value to book value 1.43 1.15 1.08

Market value to book value ratio used to find the value of a company by comparing the book value
of a firm to its market value. Book value is calculated by looking at the firm's historical cost, or
accounting value. Market value is determined in the stock market through its market
capitalization. In Trust company M/B ratio of greater than 1, meaning market value now exceeds
book value.

CHAPTER 4/ STUDY RESULT & RECOMONDATION:

4.1: study result
General Comment and results

Insurance companies always seek to achieve profitability, which is considered one of the ●
.standards ,which used for making decisions regarding to the future activities

There is an urgent need for the existence of a regulatory control system designed to evaluate the ●
.performance through various methods such as Financial analysis

The safety and efficiency of the performance of insurance companies depends on the manner in ●
which it make its decisions, and the manner that enable the companies to recognizes the threats
.facing them and how to address them

In order to perform its functions effectively and efficiently, the insurance companies it must ●
based on a commercial basis, in a competitive environment supported by the strong internal will,
to develop a more dynamic policy in the provision of services and employ our resources in ways
.which ensuring us to achieve high yields to face the possible dangers

Financial ratios analysis indicate which take into account the specificity of insurance activity in ●
:the performance evaluation the following
28
1- Great attention should be paid to leverage. Companies that are highly leveraged may be at risk
new lenders in the future. On the other hand, leverage can increase the shareholders' return on
their investment and make good use of the tax advantages associated with borrowing.

Profitability ratios show that the Trust Insurance Company achieved a return on its funds -2
In the year 2013 can be described as acceptable value of rate 6.61%, and this rate decrees
In2014 to 5.26%

underwriting ratio for trust insurance company indicates that the rate of combined ratio -3
increased from 53.21% in2013 to 69.91% in 2014 that means there is increase in operating and
underwriting expenses of company ,but in general combined ratio for Trust less than % 100 so that
can be conceder better as it shows that the insurer is earning more premiums relative to the
.claims paid and the operating expense incurred. Conventionally, a lower combined ratio is better

4- market ratio for Trust company have high rate in 2012 but its decrees in 2013 and then Began to
improve in 2014, but not reached to the rate in 2012

www.pex.ps/PSEWebSite/Entrance
.aspx

As we see in the graph the stock price "which is kind of market ratio" for insurance company
improved During the beginning of 2014 but then its fall from "2.6 to 2.4" Especially at the time of
war in 2014 but after the war began to improve .

Recommendations
Based on the research findings the following reachable recommendations were presented for
this study:
●It is positive to have high consideration of increasing the company assets. Because the size of the
company is an important factor as it influences its competitive power. Small companies have less
power than large ones; hence they may find it difficult to compete with the large firms particularly
in highly competitive markets.

We do recommend the Palestinian Legislators to issue laws related to the insurance industry that ●
encourage the creation of a competitive environment with more dynamic policies to provide
services and employ our resources in a manner that minimizing risks in different economic
.sectors
29
We do recommend the universities to take into account the privacy of insurance sector when ●
.teaching the financial analysis subject

We do recommend insurance companies to diversify its investments, instead of focusing on one ●

.kind of its insurance services

Insurance premiums must be the basic return that satisfy the company needs of liquidity to ●
.meets the claims of compensation for policyholders

We do recommend insurance companies to adopt an advertising policy which enable both legal ●
persons and natural persons to identify the broad benefits of the insurance for the policyholders
.in return for simple premiums they paid

30