Factors Affecting Corporate Financial Performance Of Ethiopian Insurance Business

This study investigates the factors affecting corporate financial performance of Ethiopian insurance business, with a particular focus on the key factors influencing profitability. The study employs Return on Assets (ROA) and Return on Equity (ROE) as measures of financial performance, while independent variables include investment income, firm size, loss ratio, liquidity, risk management, and GDP as a macroeconomic factor. Using a fixed-effects regression model, the analysis reveals that investment income and firm size have a significant positive impact on both ROA and ROE, highlighting their critical role in driving profitability. Conversely, the loss ratio exhibits a significant negative effect on financial performance, emphasizing the importance of efficient claims management in the insurance sector. Liquidity management also shows a positive correlation with profitability, while risk management and GDP have weaker and less consistent effects. The findings suggest that while macroeconomic factors like GDP play a secondary role, firm-specific factors such as investment income, firm size, and claims management are more influential in determining the financial success of insurance companies in Ethiopia. This research provides valuable insights for policymakers and industry practitioners seeking to enhance the performance of the Ethiopian insurance market.