Factors affecting profitability of insurance companies in Ethiopia: panel evidence

Abstract

The study was conducted to spotlight factors affects Profitability of insurance company. Profitability is one of the most important objectives of financial management because one goal of financial management is to maximize the owner` s wealth. The insurance company is part of immune and repair system of an economy and successful operation of the company can set energy for other industries and development of an economy. This study was aimed to identifying the major factor affecting the profitability of insurance company in Ethiopia. Return on total assets (ROA) - a key indicator of insurance company's performance- were used as dependent variable while age of company, size of company, volume of capital, leverage liquidity ratio, growth and tangibility of assets) were independent variables. The sample includes 9 insurance companies over the period 2011- 2020. The sample in this study includes nine of the insurance companies for ten years. secondary data obtained from the financial statements (Balance sheet and Profit/Loss account) of insurance companies and financial publications of NBE was analyzed. The research design was descriptive form. Based on the regression results, the company specific variables such as the Size of a company, growth rate of a company, Leverage ratio, liquidity, capital and age of the company play strong impact on the profitability of the company and size of company is the most important determinant of insurance profitability