Abstract
This paper sought to analyze some of the supposed determinants of profitability for insurance firms in Tanzania. Though the success of insurance companies has been linked to the accessibility of financial services by various scholars, yet the way profitability of companies influence success of firms has not been well explored. To undertake the study 10 insurance companies were involved out of 25 general insurance companies operating in Tanzania for 10 years from 2008 to 2017. The data was obtained from financial statements given on TIRA Report and some of them from documentary review. The paper carried out preliminary test of panel unit root to check for stationarity of variables. The appropriate fixed and random effect model test was employed to determine the fitness of the model using the Hausman specification test. Age of the firm found to be statistically influence profit of a company at 5% level while claims cost found to be statically significant at 1% level. Size of a company was found to have no significant contribution to the firms’ profitability. It is therefore recommended that the government and the regulator should smoothen rules, regulations and procedures so that penetration of insurance business to be high and also insurance company should have proper management of claims so that they can reduce expenses and increase profit of a company.
Highlights
The market value of any firm normally will depends on best performance of the industry in general and from signals obtained from financial performance of specific firm
It is recommended that the government and the regulator should smoothen rules, regulations and procedures so that penetration of insurance business to be high and insurance company should have proper management of claims so that they can reduce expenses and increase profit of a company
Basing on the model age of the firm and claims cost are two variables which are significant to explain the profitability of the firm (ROA) because probability value is very small to explain the model and size of the firm, GDP and inflation is insignificant to explain the model because the significant level is more than 5%
Summary
The market value of any firm normally will depends on best performance of the industry in general and from signals obtained from financial performance of specific firm. The main objective of all insurance companies is maximizing their profit resulting from pooling of risks form different economic agents, this is because one goal of any financial manager is to maximize the owners’ wealth and profitability and its very important determinants of how this firm perform (Berhe & Kaur, 2017). Though it will be affected with firm-specific factors, on the other hand macroeconomic factors play crucial role in influencing insurance companiesprofitability overtime
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