Implementation of Internal Control Systems and its Relationship on the Financial Performance of Life Insurance Companies

As part of the financial market, life insurance companies must maintain a robust internal control system to ensure their services benefit their customers and the overall financial market. The study aimed to measure the level of implementation of internal control systems and the financial performance of four life insurance companies. The relationship between the two variables was also investigated. The study consisted of seven (7) respondents from four (4) life insurance companies located in first-class municipalities in Nueva Vizcaya. The researchers used a structured questionnaire to gather data using descriptive and correlational designs. The audited financial statements were also used to compute the financial ratios, which were used to determine the financial performance of the companies. The data was analyzed using the following statistical tools: frequency counts, median, mean, standard deviation, percentage, and Spearman-rho using the IBM SPSS. The researchers found that the companies implement all the internal control components at a high level. The results of the financial ratios also reflected that the financial performance of the life insurance companies is varied. The companies have good profitability and earnings ratios, but the financial strength ratios show weakness in the financial performance of the companies. It was also found that the level of implementation of most of the internal control components is not significantly related to the financial performance of the life insurance companies. Only the control activities significantly correlate with the return on equity and capital adequacy ratios.