Investment Performance of Fixed Vs Variable Income Securities Held by Insurance Companies in Kenya

Abstract

The purpose of this study was to investigate, by analyzing and comparing, investment performance between the fixed and variable income securities held by insurance companies in Kenya, with a view to determine the investment category with better performance, The hypotheses, theoretical framework and the methods of data collection used were presented in the study. The results are intended to assist managers and potential investors in making investment decisions that maximize the value of their firms and thus the wealth of their shareholders. The study looked at the investment performance of fifteen randomly selected insurance companies over a five-year period between 1997-2001. The study was based on secondary data in which data collected include securities market values, net annual disposals, interest and dividends received. Annual returns and arithmetic means were computed and results compared. The notion of expected returns and the annual investment data necessitated the use of the Percentage Return Model as the appropriate financial tool. The comparison of annual returns and their arithmetic means together with the empirical evidence on the hypothesis testing suggest that the variable income secu;ities performed better than the fixed income securities over the five-year period under study. It is evidesr from the study findings that the components of the model used are critical variables in determining securities performance. There is therefore need for good precision of those variables if reliable results and credible comparisons are desired.