Investment Decisions and Financial Performance of Insurance Companies in Kenya.

The financial performance of insurance firms in Kenya has been fluctuating, influenced by investment decisions, regulatory frameworks, and economic conditions. This study examines the relationship between investment decisions and financial performance among insurance companies in Kenya, focusing on government securities, corporate bonds, stocks, and real estate. A cross-sectional research design was adopted, targeting all 56 insurance and reinsurance firms registered with the Insurance Regulatory Authority of Kenya. The study utilized secondary data, analyzed through descriptive and inferential statistics, including ANOVA, multiple regression analysis, and Pearson correlation. Findings indicate that investment in government securities exhibits a strong positive correlation with return on assets (ROA), providing stable but limited capital growth. Corporate bonds demonstrate a moderate positive correlation with ROA, suggesting that firms benefit from long-term bond investments. Stock investments contribute to improved financial performance, albeit with a weaker correlation than government securities. Real estate investments show a weak relationship with ROA, implying limited direct impact on profitability despite long-term financial security benefits. The study concludes that strategic investment diversification can enhance financial performance, but insurance firms must carefully balance risk and return. It is recommended that insurers adopt a mixed investment strategy prioritizing government securities and corporate bonds for stability, while selectively investing in stocks and real estate for growth. Future research should explore the impact of macroeconomic factors and emerging investment instruments, such as digital assets and green bonds, on the financial performance of insurance firms.