FACTORS AFFECTING PERFORMANCE OF ETHIOPIAN INSURANCE COMPANY

Abstract

Insurance is one of the major risks mitigating mechanism in modern economy. The existence and survival of financially strong Insurance Companies is therefore inevitable. For Insurers to be reliable and financially sound, their profitability and most importantly knowingly what factors makes them profitable is very crucial objective. In order to achieve this objective, this study used quantitative research approach using Panel data covering eight year period from 2010–2017 for seven insurance companies. The study uses linear regression model to see the effect of independent variables, which were the factors under study, on dependent variable profitability proxied by ROA. Data was analyzed with a software Eviws8.The findings of the study showed that, inflation and leverage have statistically significant relationship with insurers’ profitability. However, On the other hand, variables like Motor insurance, market share have positive and statistically insignificant relationship with insurers’ profitability. Motor insurance is the other most important factor affecting profitability In addition, economic growth rate and inflation have negative and insignificant influence on profitability. The study provides evidence that, inflation and Leverage are most important factors affecting profitability of insurance companies Ethiopia.