Profitability Determinants In The Insurance Sector In Ethiopia A Panel Evidence On Non-life Insurance

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

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