The Determinants Effect on Profitability of Non- Life Insurance Industry in Ethiopia

Abstract

This research investigates the determinants effect on profitability of non-life insurance industry in Ethiopia. The study examines ten insurance companies which operate within 2008 to 2015 time frame work with total sample size of 80 populations. The data for the study was collected from secondary sources from financial statement and annual report of individual firms and annual report of national bank and MOFED reports. A purposive sampling technique was used to choose the study participants since the time framework only eight years and select ten companies which operate under this time frame. Descriptive statistics, correlation and regression analysis were used to examine the determinants effect of profitability on non-life insurance in Ethiopia. Size of companies, tangibility of asset, leverage, liquidity, loss ratio, and premium growth considered as internal variables, market concentration ratio as industry specific variables and inflation rate & real GDP growth rate as macro-economic variables. The study findings shows that internal variables size and tangibility affect profitability of non-life insurance industry in Ethiopia positively with significant level and loss ratio/ underwriting risk and premium growth has negative relationship with profitability significantly. However liquidity has insignificant and negative effect on profitability of non-life insurance industry. Market concentration ratio affects the non-life insurance industry profitability negatively at insignificant level. From external variables economic growth have significant & positive relationship with profitability of Ethiopian insurance market. This research clearly shows the determinants effect on profitability of non life insurance industry in Ethiopia. The implication of the study applies for managers, Owners, regulatory bodies and policy makers have been discussed.