In many rapidly growing economies and emerging markets like Ethiopia, the insurance companies are expected to play a crucial role. The dividend decision is one of the critical financial managementdecisions for firms. Dividend decision is also among the widely addressed and controversial issue in field of finance. The inconclusiveness of dividend theories and empirical studies on the relationship between firm's profitability and dividend payout decisions is one of the most debatable topics inresearches. Hence, the objective of this study is to examine the relationship between dividend policy and Ethiopianprivate insurance company's profitability and to contribute to the ongoing debate. To achieve the objective of this study, secondary data were collected from the Audited annual financial statements of 8 private insurance companies in Ethiopia, from year 2006-2015. The study used purposive sampling technique to collect the necessary data. Descriptive statistics and Pearson correlation matrix were used for data analysis. Paneldata andPooled OLS regression model were also employed for empirical testing. Return on Asset (ROA) used as a measurement of insurance company's profitability (dependent variable) while dividend payout ratio used as the main explanatory variable. The controlling variables were firm size, tangibility and leverage. The findings of this study indicated that there is positive and significant relationship between profitability and dividend pay-out policy decision of Ethiopian private insurance companies. This result is also consistent with the Bird-in-the hand theory. The result also shows that leverage, size of insurance company and tangibility has relationship with profitability of insurance companies.