Maintaining the Real Value of Equity of Insurance Companies: an Empirical Investigation in the Istanbul Stock Exchange

The purpose of this study is to investigate and find out the performance of Turkish insurance companies listed on the Istanbul Stock Exchange (ISE) and to analyze the performance of the insurance companies by using variance analysis, ratios and cash flow analysis. The insurance companies in the European Union have close contact with the European banking industry through a cross-selling process. This study indicates that most institutions and private investors in Turkey are not voluntarily insured. Therefore, the insurance products and services in Turkey cannot be extended in the short run. The most important problem of the Turkish insurance companies is to protect the shareholders against inflationary conditions. Upon analyzing the financial statements of insurance companies listed on the ISE, it is determined that the real value of the equity has been declined. At the same time, these companies have performed poorly compared with the other industries of the Istanbul Stock Market. It is also concluded that funds arising from technical operations of the insurance industry has been decreasing from year to year. However, a slight performance increase has been achieved through funds management, mostly derived from effective returns of treasury bills. The reason for these slowdowns is inefficient capital management, which is also embedded in the value of the common stock. According to this study, it is expected that the expansion of insurance services affects the return of the common stock in the midand long-terms. This study also shows that there is a strong relationship between the effectiveness of insurance companies and return on common stocks. Therefore, the mismanagement of risk and fund influences the performance of insurance companies. Finally, increasing the quality of insurance management affects the market value of common stocks and shareholders’ wealth. JEL Classification: G 22, G 32