THE DETERMINANETS OF PROFITABILITY OF NON LIFE INSURANCES. A case study in Ethiopian Insurance companies for the period of 2007-2016

Abstract

This paper is investigated the internal and external determinants of insurance companies’ profitability in Ethiopia for the period from 2007-2016. By using the secondary data available from the national Bank of Ethiopia. The findings of the study showed that underwriting risk, technical provision and solvency ratio have statistically significant and negative relationship with insurers’ profitability. However, reinsurance dependence has negative but insignificant relationship with profitability. On the other hand, variables like liquidity, company size and premium growth have a positive and statistically significant relationship with insurers’ profitability. In addition, economic growth rate has significant influence on profitability whereas inflation has insignificant influence on insurers’ profitability. The study provides evidence that underwriting risk, technical provision and liquidity are the most important factors that affect profitability of insurance companies in Ethiopia. So, the study recommends that Ethiopian insurance companies’ managers should give consideration to underwriting risk, technical provision and liquidity to increases their profitability significantly. Keywords: