Financial Ratio Analysis of Insurance Companies By Means Of Data Envelopment Analysis and Analytic Hierarchy Process

Insurance companies need a strong financial structure in order to fulfill their liabilities. Ratios related to solvency, asset quality, liquidity activity and profitability are evaluated on behalf of measuring the capital adequacy. Financial ratio analysis is a widely used analytical tool which evaluates the relative effectiveness of companies. While carrying out financial ratio analysis in order to measure relative efficiency the ratio of output to input ratio of companies be used. A single measure can be taken as the calculated weighted sum of a number of rates. At this point, necessity of determining the weights of the different rates exists. Pakkar (2014a) proposed a method for determining the weights by means of Data Envelopment Analysis and Analytic Hierarchy Process. The aim of this study is ranking of 8 non-life insurance companies with the help of financial ratios of year 2014 in Turkey by utilizing the approach of Pakkar. Two different results which based on expert opinion compared in order to see how the findings are affected by different expert opinions in this applied method. Consequently, Liberty and Ziraat Insurance are found as the most effective companies, whereas Sompo Japan and Güneş Insurance are found as the least effective insurance companies. In addition according to the value of the parameter which is in the determined minimum efficiency loss intervals various rankings of insurance companies has been observed.