Real Estate Investment Trusts and Financial Performance of Life Insurance Companies in Nairobi County, Kenya

Abstract

Life insurance companies in Kenya are experiencing challenges in financial performance, characterized by low profitability despite increasing premium inflows. Although revenues have grown, many insurers continue to incur underwriting losses. Additionally, profit margins are being suppressed by a continuous decline in return on assets, signaling inefficiencies in capital utilization and weak returns from investment portfolios. The present study sought to establish the effect of portfolio diversification through real estate investment trusts on financial performance of life insurance companies. A causal research design was used. The target population was the 23 life insurance companies. From each company, the finance officers, risk and compliance officers, actuaries, and underwriters will be involved in the study. This means 4 respondents from each company, hence a total of 92 respondents. A questionnaire was used to gather primary data. Both descriptive and inferential statistical techniques were employed in this study. Data analysis was conducted using the Statistical Packages for Social Sciences (SPSS). The findings were presented in tables. The results revealed a significant relationship between real estate investment trusts and financial performance (r = 0.394). Regression analysis further showed that real estate investment trusts accounted for 15.5% of the variation in financial performance (R² = 0.155). It was concluded that real estate investment trusts substantially strengthen financial outcomes by balancing risk, liquidity, and growth. It is therefore recommended that life insurance companies to focus more on capital allocation to real estate investment trusts to improve financial performance.