DETERMINANTS OF ETHIOPIAN INSURANCE COMPANIES PROFITABLITY

Abstract

This study titled “Determinates of Ethiopian Insurance Companies Profitability”. The major objective of the study was to investigate the most important determinant of profitability in the insurance sector of Ethiopia by using regression analysis model. The study was based on entirely secondary data collected from NBE, each insurance companies and MOFEC. The study covers the time period from 2006 - 2015. The study used Explanatory research design to check the relationship between dependent variable profitability and independent variables (liquidity, leverage, tangibility of asset, level of equity, market share, economic growth and inflation). The regression result reveals that liquidity has direct and significant influence on profitability, leverage, GDP, Inflation have indirect and significant relation with profitability and market share and level of equity have direct but insignificant effect on Ethiopian insurance companies profitability the other variable which is tangibility of asset has indirect and insignificant relationship with profitability. Finally, the study suggests the mangers of Ethiopian insurance companies to prepare financial plans like cash budget, and pro-forma balance sheet and income statement to cop up with macroeconomic changes and to provide new product lines that maximizes their market share and last but not the least to closely review liquidity risk and device the strategy like liquidity management.