DETERMINANTS OF PROFITABILITY OF EGYPTIAN INSURANCE COMPANIES LISTED IN STOCK OF EXCHANGE

Abstract

Profitability is one of the most important objectives of financial management because one essential goal of financial management is to maximize the owner's wealth and profitability. This study aimed to investigate the factors that mostly affect the profitability of listed insurance companies in Egyptian stock exchange. Specifically, this study examines the effect of insurance firm specific factors as independent variables (age of company, size of company, leverage ratio, liquidity, capital adequacy, loss ratio, and inflation rate) on profitability proxied by return on assets (ROA) which is defined as the before-tax profits (BTP) divided by total assets (TA). The population in this study includes two Egyptian insurance companies listed in the Egyptian stock of exchange during the period of 1995/1996-2013/2014. The findings show that there is no relationship between profitability and age of the company and there is significantly positive relationship between size of the company and profitability. The result also shows that the size of capital is significantly and positively related to profitability. Loss ratio and leverage ratio showed negative but significant relationship with profitability.