Analysis of Factors Affecting Financial Performance Evidence from Selected Ethiopian Insurance Companies

Financial performance is the key question for survival and stability of insurance industry. The main objective of the study was to investigate factors affecting financial performance of Ethiopian Insurance Companies. These factors categorized in to firm specific, industry and macroeconomic variables using Return on Asset used for measuring financial performance. The researcher applied quantitative approach and explanatory research design and purposive sampling. Secondary data collected from 12 insurance companies out of 17 and National Bank of Ethiopia (NBE) from 2011 to 2016. Descriptive statistics and Random Effect econometric model applied for data analysis. Finding of the study indicated that previous profit performance and volume of capital positively and significantly affects the financial performance but solvency margin and loss ratio have negative association and significant effect. The lag GDP rate and current inflation have positive and significant impact on ROA whereas the lag inflation and exchange rate had negative and significant influence. Accordingly, it is better for companies to improve their solvency margin and, the government to stabilize the currency exchange rate.