FACTOR AFFECTING FINANCIAL PERFORMANCE OF SELECTED INSURANCE COMPANIES IN ETHIOPIA

Abstract

The study investigated factors affecting the financial performance of 10 selected insurance companies out of 18 National Bank of Ethiopia (NBE) from 2014 to 2023. An explanatory research strategy employing quantitative techniques and panel data was adopted, utilizing secondary data from the National Bank of Ethiopia. Results from the regression model showed a significant negative correlation between inflation and the financial performance (ROA) of the sampled insurance enterprises, suggesting that for every percentage increase in inflation, the return on assets would decrease by 11.2%. Similarly, a statistically significant negative relationship was observed between underwriting risk and ROA, with a 13.1% decrease in ROA for every 1% rise in underwriting risk, significant at a level below 1%. Finding of the study indicated that the company size and market share were positive and insignificant whereas risk, leverage, inflation and exchange rate were negative and significant. Accordingly, it is better for companies to improve and should pay greater attention to the significant variables such as: leverage, liquidity, premium growth, underwriting risk, inflations and gross domestic product.