Firm specific factors that affect the profitability of insurance companies operating in Tanzania

Profitability is important for sustainability of insurance companies as most shareholders are driven by profit motive. Profit compensates shareholders for opportunity cost they incur in investing their funds in the insurance sector and when reinvested, profit acts as source of growth within the companies and sectors. In the recognition of the importance of insurance sector to Tanzania economy, this study was conducted to examine companies’ specific variables that affect profitability of insurance companies in Tanzania. The study was conducted at Tanzania Insurance Regulatory Authority and the secondary data was used for the study. The data were collected for year 2014 and were subjected to multiple regression analysis. The findings of the study revealed that profitability of insurance companies for the period covered under the study was significantly positively influenced by the insurance companies’ size and significantly negatively influenced by the age of insurance companies, leverage and tangibility of assets while Liquidity was determined to have no significant impact. From the findings of the study, it is recommended that stakeholders of the sector should encourage growth of their insurance companies, minimize inertia and bureaucratic complications that old companies are prone to, minimize loans that companies take and minimize investment in tangible assets which are mostly in fixed assets.