Use of production functions in assessing the profitability of shares of insurance companies

Abstract

In this study the production functions (Cobb-Douglas, Zener-Rivanker, and the transcendental production function) have been used to assess the profitability of insurance companies, by reformulating these nonlinear functions based on the introduction of a set of variables that contribute to increase the explanatory capacity of the model. Then the best production function commensurate with the nature of the variable representing the profitability of insurance companies was chosen, to use it to assess the efficiency of their profitability versus the use of different factors of production and thus the possibility of using it in forecasting. It was found that the proposed model of the production function "Zener-Rivanker" is the best production functions representing the profitability of the Tawuniya and Bupa Insurance Companies. The proposed model of the Cobb-Douglas production function is suitable for the results of both Enaya and Sanad Cooperative Insurance Companies. The explanatory capacity of the production functions was also increased when the proposed variables were added (net subscribed premiums-net claims incurred).