FACTORS AFFECTING THE PROFITABILITY OF INSURANCE COMPANIES IN ETHIOPIA

ABSTRACT

The objective of this study was to identify the factors affecting the profitability of insurance companies in Ethiopia. To achieve this objective the researcher employed explanatory and descriptive research design on a panel data of a year 2014 to 2023 of 14 insurance companies from the National Bank of Ethiopia (NBE), which were selected by purposive sampling technique. Data collection is primarily conducted through documentation analysis, wherein key financial variables such as Return on Assets (ROA), age of company, inflation rate, retention rate, market share, tangibility of assets, leverage ratio, loss ratio, and company size are systematically analysed, by using descriptive and econometric analysing technique. A panel data regression model under the fixed-effects methodology was employed. Results of the study indicated that there is a statistically significant negative relationship between profitability and company age, inflation rate, leverage ratio, and loss ratio. whereas, market share, and company size had statistically significant positive association with profitability of insurance company. On other hand tangibility of asset was insignificant association with profitability of insurance company. Based on the findings, the researcher recommended that, Ethiopian insurance companies should give consideration to these factors to appropriately address profitability issues.