THE EFFECT OF INVESTMENT ON FINANCIAL PERFORMANCE OF INSURANCE COMPANY; A CASE STUDY ON ETHIO LIFE AND GENERAL INSURANCE S.C

Abstract

With the help of multiple linear regression model and descriptive analysis, an attempt was taken to measure the profitability of Ethio Life and General insurance S.C. It was identified that firm’s investment is an important determinant of profitability. Based on this rationality, the researcher selected Ethio Life and General insurance company purposely to identify its profitability and determinants of profitability. Among the selected variables to determine the return on asset; investment in properties, age, liability and liquidity ratio of the firm were identified as positive and significant determinants of firm’s profitability. Size of the firm and its return from investments on equity and share were identified as having significantly negative impact on return on asset, profitability of Ethio Life and General insurance S.C. According to this result, this firm is recommended to invest more on properties, and to increase the liability side of the asset. The company is also recommended to raise its liquidity ratio and to sustain its operation in the market since age plays a role for the increment of return on asset.