Proceedings of the 7th International Conference on Management, Economics and Finance
Year: 2023
DOI: https://www.doi.org/10.33422/7th.icmef.2023.11.105
[PDF]
Does the Application of Investment Properties’ Measurement Models Affect the Profitability of the Company? – The Case of Insurance Companies in Croatia?
Hrvoje Perčević, Marina Ercegović
ABSTRACT:
The aim of this research is to determine to what extent a particular model of measurement of investment in properties is applied in insurance companies in Croatia, and to investigate whether the application of a particular model affects the profitability of insurance companies. The research refers to the period from 2017 to 2021, and is conducted on 11 insurance companies that have recognized investments in real estate in their financial reports. In order to implement the research objectives, descriptive statistical methods were applied. The research results showed that 6 out of 11 insurance companies apply the cost model, while 5 insurance companies apply the fair value model. Insurance companies that apply the fair value model hold 56.17% of the total assets of all insurance companies in Croatia. Furthermore, the research results showed that insurance companies that applied the fair value model achieved higher profitability (measured by the ratio of return on assets) compared to the profitability of the entire insurance sector and the profitability of those insurance companies that applied the cost model. Finally, the research results indicated that the application of the fair value model in measuring investment properties has a greater effect on the profitability of insurance companies in Croatia than the application of the cost model.
keywords: cost model, fair value model, insurance companies, investment properties, return on assets