Effects of Underwriting Result and Investment Income to the Profitability of Private Insurance Companies in Ethiopia (original) (raw)

Factor Affecting Insurance Companies Profitability in Ethiopia

Background: The performance of any firm not only plays the role to increase the market value of that specific firm but also leads towards the growth of the whole industry which ultimately leads towards the overall prosperity of the economy. The aim of this study was determining factor that affect profitability of Insurance Company in Ethiopia. Methodology: The sample in this study includes 5 years data from 2012 to 2016 which is secondary data obtained from the financial statements (Balance sheet and Profit/Loss account) of Insurance Companies in Ethiopia are analyzed. To comply with the objective of this research, the authors are primarily used based on quantitative research, which constructed an econometrics model to identify and measure the determinants of profitability.Results: The average and standard deviation for profitability of insurance company measured by using Return on assets (ROA) for Ethiopian insurance companies was 0.117 and 0.08, respectively. In the univariable an...

Factors affecting profitability of insurance companies in Ethiopia

2019

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 knowing 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 ten-year period from 2009–2018 for nine insurance companies. The study used linear regression model to see the effect of independent variables, which were the factors under study, on dependent variable profitability peroxide by ROA. Data was analyzed with software Eviws8.The findings of the study showed that market share and managerial efficiency have statistically significant relationship with insurers' profitability, and liquidity is positively less significant relationship with profitability. Whereas the Volume of capital, inflation and GDP ar...

A Study on the Performance of Insurance Companies in Ethiopia

2020

Profitability is one of the most important objectives of financial management because one goal of financial management is to maximize the owner` s wealth. This paper examined the effects of firm specific factors (age of company, size of company, volume of capital, leverage ratio, liquidity ratio, growth and tangibility of assets) on profitability proxied by Return on Assets. Profitability is dependent variable while age of company, size of company, volume of capital, leverage liquidity ratio, growth and tangibility of assets are independent variables. The sample in this study includes nine of the listed insurance companies for nine years (2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011). Secondary data obtained from the financial statements (Balance sheet and Profit/Loss account) of insurance companies, financial publications of National Bank of Ethiopia are analyzed. From the regression results; growth, leverage, volume of capital, size, and liquidity are identified as most im...

FINANCIAL PERFORMANCE OF INSURANCE INDUSTRY IN ETHIOPIA.pdf

There have not been empirical studies that address the financial performance of Ethiopian insurance companies in Ethiopia. This study was undertaken to evaluate the financial performance of non-life insurance industry in Ethiopia by using CARAMEL frame work. The researcher selected 10 insurance companies from the total of 15 based on their year of establishment. Secondary data collected from the individual insurance companies and from the National Bank of Ethiopia from the fiscal year of 2008 to 2012 was used for the completion of the study. The model employed for this study is ROA=α+β1KTAit+β2ONETA1it+β3Rit+β4Ait+β5MEit +β6EPR3it+β7LRit +ε. ROA has been used as the dependent variable explained by capital adequacy, assets quality, re-insurance, actuarial issues, management efficiency, earning and profitability and liquidity. Multiple linear regression was applied. From the multiple linear regression, it was found that assets quality and combined ratio have negative relationship whereas capital adequacy and retention ratio have positive relationship with performance (ROA) of insurance industry in Ethiopia. One of the objectives of the study is that to identify the major factors that affect the financial performance of insurance industry in Ethiopia and it was found from the regression result that the major factors are capital adequacy, assets quality, re-insurance and combined ratio. The researcher recommended that the management and regulators of Insurance companies in Ethiopia should give due attention on capital adequacy and set minimum requirement for the capital adequacy of insurance industry, assets quality and re-insurance. 56 3. For the improvement of reinsurance ratio, proper management of premium will help insurers to retain and manage maximum risk efficiently. 4. Other researchers should incorporate the financial and non financial performance of both non life and life insurance companies in Ethiopia.

Factors Affecting Profitability of Insurance Companies in Ethiopia: Panel Evidence

2020

Profitability is one of the most important objectives of financial management because one goal of financial management is to maximize the owner` s wealth. This paper examined the effects of firm specific factors (age of company, size of company, leverage ratio, premium growth rate liquidity ratio and tangibility of assets) on profitability proxied by ROA. Profitability is dependent variable while age of company, size of company, premium growth rate,leverage liquidity ratio and tangibility of assets) are independent variables. The sample in this study includes nine of the listed insurance companies for twelve years (2005-2016). Secondary data obtained from the financial statements (Balance sheet and Profit/Loss account) of insurance companies, financial publications of NBE are analyzed.Panel data analyzed using Random Effect Model (FEM) after testing the appropriateness of the model with Fixed Effect and Pooled regression model. From the regression results; size,premium growth rate a...

Empirical Evidence on Influencing Factors of Profitability of Private Insurances in Ethiopia

2022

Abstract: This study was primarily conducted to investigate influencing factors for insurance companies specifically for private insurance operating in Ethiopia. To attain the objective both industry-specific and macro-economic factors include the ratio of liquidity, leverage, the volume of capital, age of the insurance, underwriting risk, premium growth, market share, inflation, and economic growth. The study included ten insurance companies with operations from 2011 to 2020. Secondary data was collected from the Ethiopian central bank (National Bank of Ethiopia). An explanatory research design with a mixed approach was used for this study. Furthermore, this study employed OLS to estimate a multiple regression model constructed through E-views 10 software after all the necessary diagnostic tests were undertaken. The finding indicates liquidity, firm premium growth, the age of the company, and market share have significant positive effects on insurance profitability. Whereas, underwriting risk, leverage, the volume of capital, and inflation reveal significant but adverse effects on insurance profitability. The study suggests insurances companies adopt different techniques such as improving loss handling mechanisms, assessing and gathering adequate information about the insured before selection, and marketing managers should pay a great deal of attention to maximizing market share through the use of user-friendly information technology for both the insurance and it is customers. Keywords: Profitability, Private Insurance Company, Panel, Ethiopia

Determinants of Financial Performance of Insurance Companies in Ethiopia

2019

The insurance sector plays important role in contributing to economic growth, efficient resourceallocation, reduction of transaction costs, creation of liquidity, facilitation of economic of scalein investment, and spread of financial losses. Financial performance is the most importantindicator of good financial management as the objective of financial management is to maximizeorganization’s earnings measured by profitability. This study investigated the determinants offinancial performance of insurance companies in Ethiopia based on Secondary data obtainedfrom financial statement of nine insurance companies for eleven years, 2006 to 2016 statementsand balance sheet of insurance companies from NBE. The Method of Data analysis used in thisstudy is correlation and multiple regression analysis. The findings of the study indicate thatunderwriting risk have statistically significant and negative impact on insurers financialperformance and also indicates that there is a positive relations...

Determinants of Insurance Companies' Profitability in Ethiopia

2014

This paper examined the effects of firm specific factors (size of company, leverage ratio, liquidity ratio, loss ratio/ risk, tangibility of assets, growth and managerial efficiency) and macroeconomic factors (economic growth and inflation) on profitability peroxide by ROA. The sample in this study includes ten insurance companies for six years (2008-2013). Secondary data obtained from the financial statements (Balance sheet and Profit/Loss account) of insurance companies, and financial publications of MOFED are analyzed. From the regression result; size, leverage, tangibility of asset, loss ratio/ risk, firm growth and managerial efficiency are identified as significant determinants of profitability hence firm size, tangibility of asset, firm growth and, managerial efficiency are positively related. In contrast, leverage and loss ratio/ risk are negatively but significantly related with profitability. Liquidity, inflation, and economic growth are not significant determinants of pro...

The Effect of Investment on Financial Performance of Insurance Companies in Ethiopia

2018

List of Acronyms OECO Organization for Economic Cooperation and Development EIRF European insurance and reinsurance federation NBE National Bank of Ethiopia OLS Ordinary Least Square CLRM Classical Linear Regression Model DW Durbin-Watson GDP Gross Domestic product ROA Return on asset ROE Return on equity TDI Time deposit investment EI Equity investment TBI Treasury bill investment FAI Fixed asset investment CAR Capital adequacy ratio

Profitability of Non-Life Insurance and its Driving Dynamics in Ethiopia

Pacific Academy of Higher Education & Research University), 2022

Recently, profitability is considered as a central issue to the company's overall operational activities and improving the company's financial performance is highly contributing to the development of the country economy. This study intends to investigate the driving factors of profitability in the insurance sector in Ethiopia with special reference to non-life insurance companies, data obtained from audited financial statement of twelve (12) insurers for a period of six years (2011-2016) with total of 72 observations through panel data by using Ordinary-Least-Square (OLS). The results of panel least square regression analysis indicate that industry concentration ratio and leverage have statistically significant and positive impact whereas diversification, underwriting risk and reinsurance dependence has a negative and statistically significant relationship with non-life insurance companies' profitability. However, there were no support of firm liquidity, real GDP growth rate and Inflation impact on profitability of non-life insurance companies in Ethiopia. In this study, the perceived drivers of profitability was estimated as a result of low amount of revenues collected from the general insurance in Ethiopia The management bodies of non-life insurance companies (line) should give high attention on firm and industry related variables, particularly by adopting better risk management strategies as well as better internal control to achieve superior profitability.