Abstract:
The macroeconomic and firm-specific factors determining the profitability of
Ethiopian insurance companies were the subjects of the study. The study looks at the
effects of macroeconomic variables like GDP and inflation, as well as firm-specific
factors like company size and liquidity ratio, on the profitability of the Ethiopian
insurance sector. The study employed a mixed research approach to accomplish this
study. Nine insurance companies' worth of panel data from 2014 to 2023 is
examined. The study's conclusions demonstrated a statistically significant and
positive relation between insurers' profitability and company size, liquidity ratio, and
inflation and GDP have a significant negative effect on insurer’s profitability. In
order to greatly boost their profitability, the study advises managers of Ethiopian
insurance companies to take into account factors like company size, inflation, and
liquidity ratio and encouraged to focus on growth and expansion, scaling up
operations, maintain optimal liquidity level, regularly monitor liquidity ratios,
introduce index features, focusing on market segments, diversify offerings life and
non-life insurance products which can help stabilize revenue streams during
periods of economic expansion or contraction and future research could
explore additional areas, such as the effectiveness of insurance companies in
risk indemnification and savings intermediation.
