Profitability Determinants in the Insurance Sector in Ethiopia: A Panel Evidence on Non-Life Insurance

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This study intends to investigate the determinants of profitability in the insurance sector in Ethiopia with reference to general (non-life) insurance companies on basis of data covers six years (2011-2016) period. The study selected sample of twelve (12) insurance companies to study them for a period of six years (2011-2016) with total of 72 observations through panel data. Accordingly, the study used documentary analysis of companies’ audited financial statements of general insurers which obtained from NBE and head office of each insurance companies. The key explanatory variables were selected to disclose their relationship and influence on profitability measured by return on asset (ROA) from the prominent previous studies. The CLRM assumptions needed to be fulfilled for OLS that were tested and the residual was found to be homoscedastic, free of Multicollinearity, free of autocorrelation and normally distributed. The results of panel least square regression analysis indicate that industry concentration ratio and leverage, have statistically significant and positive relationship with Non-life insurance business profitability. On the other hand, diversification, underwriting risk and reinsurance dependence has a negative and statistically significant relationship with general insurance companies’ profitability. Based on this finding, the study suggests that, the management bodies of the insurance companies should give high attention on firm and industry related variables, particularly by adopting better risk management strategies and better internal control to achieve superior profitability. Keywords: Insurance, Profitability, Firm specific, Macroeconomic, Ethiopia



Insurance; Profitability; firm specific; macroeconomic; ethiopia