Performance Analysis of UAE Listed Insurance Companies for ...badriconsultancy.com/wp-content/uploads/2019/07/Performance-An… · The top 5 companies had a combined premium of AED

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Performance Analysis of UAE Listed Insurance Companies for Nine Months ended September 30, 2018

November 15, 2018

2www.badriconsultancy.com

The listed Companies in UAE reported a profit of AED 1,420 million in nine months of 2018 as compared to AED 1,092 million in 2017 and AED 778 million in 2016. This translates to a CAGR of 35%. The loss ratio plummeted from 71% in Q3-2016 to 63% in Q3-2017 to 59% in Q3-2018.

The Insurance Industry as represented by the 30 listed companies covered in the analysis presents a positive outlook.

The declining trend in loss ratio has supported an increasing Return on Equity observed over the 4 year period.

Industry at a Glance

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Loss Ratio Combined Ratio ROE GWP Growth %

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Premiums

Profitability

Technical Provisions

Loss Combined & Expense Ratio

Return on Equity

Conclusion


Gross Written Premium

Total Gross premiums written by the listed insurance companies, in the nine months of 2018 amounted to AED 17.1 billion, as compared to the premium written corresponding period of 2017 is AED 16.8 billion, which shows a growth of 2%.

The top 5 companies had a combined premium of AED 10.2 billion for nine months of 2018 as compared to AED 9.7 billion for 2017, a growth of 4% while their market share has marginally increased by 1%.

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GWP 30-Sep-2018 GWP 30-Sep-2017



The highest growth over the nine months

of 2018 was shown by UIC, among the

companies that operated throughout

2017, with an increase of 56% in premiums

compared to the corresponding period of

2017. The biggest decline over the same

period was shown by AKIC with a decrease

of 56% as compared to 2017.

Overall, of the 30 listed companies, 13

recorded a growth in nine months

premium volumes as compared to the

previous period, while 17 companies saw

premiums plummet.

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-1%-4% 10% -13% -12% -22% 28% -24% 6% 14% 17% -21%

-9%-29% 1,602%

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GWP 30-Sep-2018 GWP 30-Sep-2017



For the listed companies the GWP grew from AED 14.7 billion to AED 16.8 billion in the nine months of 2017 with an increase of 14.7%, and from AED 16.8 billion to AED 17.1 billion in corresponding period of 2018 with an increase of 2.0%

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Gross Written Premium Growth %


Retention Ratio

The highest retention ratio for the nine months of 2018 of 82% is reflected by GCIC, whereas the lowest retention ratio of 26% is reflected by DIN.

The weighted average retention ratio for listed companies was at 45% (Q3-2017 : 45%).

The retention ratios have been calculated as a ratio of net written premium to gross written premium.

Although there may be exceptions, Retention ratios are generally reflective of the lines of business being underwritten; Motor and Medical generally tend to have high retention ratios, while commercial lines such as Aviation, Engineering and Fire tend to have lower retentions. Also, since this analysis does not segregate life and non-life business, the Companies writing higher volumes of life, especially IL and PA, would also tend to show higher retention levels.

82% 80%75% 74% 73% 71%

63% 62% 59% 57% 55% 54% 54% 53% 52% 51% 49% 46% 46% 46% 43% 43% 39% 36% 34% 30% 30% 28% 26% 26%

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Retention Ratio

Retention Ratio 30-Sep-2018 Weighted Avgerage Ratio


Profit Growth – Trend

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Profit Growth 4 year Trend

2016 Q3 experienced a sharp growth in profits as compared to 2015 Q3.

Since 2016 Q3, the profit growth has been on a declining trend although it has remained positive throughout the last 3 years.


Profit(Before Tax)

AKIC booked the highest loss of AED 9.4 millionduring the nine months of 2018 as compared to the loss of AED 106 million in the corresponding period of year 2017.

AKIC showed major improvement with a drop in loss of 91% as compared to the corresponding period of last year.

ORIENT booked the highest profit during the nine months of 2018 of AED 352 million as compared to the corresponding period of year 2017 of AED 307 million .

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Profit 30-Sep-2018 Profit 30-Sep-2017

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Profit(Before Tax)

Total profit generated for the nine months of 2018 amounted to AED 1,420 million compared to the profit of the corresponding period of 2017 of AED 1,092 million which shows an increase of around 30.0%.

4 out of the 30 companies posted losses in the nine months of 2018 amounting to approx. AED 22 million, as compared to 4 companies being loss making in the corresponding period in 2017 with AED 134 million.

62%-40% 23% 12%

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Profit as a Percentage of NEP

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Profit Percentage 30-Sep-2018 Profit Percentage 30-Sep-2017

In this chart, profitability of Companies on every unit of Net Earned Premium is compared.

DHAFRA has produced the highest ratio of 78% while OUTFL produced the lowest ratio of -42%.


Profit Before and After Investment Income

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Profit Before Investement 30-Sep-2018 Investement Income 30-Sep-2018

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Profit Composition Before Investment Income

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Profit Composition - UW and Investment Income



Premium Benchmarked on the basis of Profitability

Of the top 10 companies by Premium volume, 7 have a lower rank when benchmarked on the basis of profitability. On the flip side ORIENT, ADNIC and EIC seem to have built up large and profitable books of business.

Gross Premium ProfitOIC 1 4

ORIENT 2 1

ADNIC 3 2

AAAIC 4 8

EIC 5 3

SALAMA 6 7

UNION 7 20

TAKAFUL-EM 8 23

NGI 9 12

ABNIC 10 13

DIN 11 14

RAKNIC 12 18

TKFL 13 9

DNIR 14 10

ASNIC 15 17

CompanyRanking

IndicGross Premium Profit

METHAQ 16 21

DHAFRA 17 6

WATANIA 18 22

DARTAKAFUL 19 25

ALLIANCE 20 11

AWNIC 21 5

AFNIC 22 15

AMAN 23 26

IH 24 24

ASCANA 25 16

OUTFL 26 29

UIC 27 27

SICO 28 19

AKIC 29 30

GCIC 30 28

CompanyRanking

Indic


Technical Provisions – Listed Companies

Total net reserves as at Sep-2018 grew by 5% as compared to the net reserves as at Sep-2017

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Net Technical Provisions

Claims Reserves 30-Sep-2018 Claims Reserves 30-Sep-2017

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Claims Reserves 30-Sep-2018 Claims Reserves 30-Sep-2017


Loss and Combined Ratio – Trend

Weighted Average loss and combined ratio depicts a decreasing trend over the 4 year period.

In the nine months of 2018, weighted average loss ratio was 59% (Q3-2017: 63%)and weighted average combined ratio was 89% (Q3-2017: 91%).

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Loss and Combined Ratio 4- year Trend

Loss Ratio Combined Ratio


Loss and Combined Ratio – Listed Companies

The highest combined ratio of nine months to 2018 is 164% is reflected by OUTFL and the lowest combined ratio is of DHAFRA at 41%.

For Takaful companies we have consolidated the Policyholders and Shareholders P&L for comparative purposes.

A company is deemed to be profitable from an underwriting perspective if the Combined Ratio is below 100%. 3 companies that are making underwriting losses are still booking overall profit due to investment income. Insurance companies need to concentrate on underwriting profits as that is their primary function. The new pricing regulations are a step in that direction.

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Loss & Combined Ratio

Loss Ratio Combined Ratio Weighted Avgerage Loss Ratio Weighted Avgerage Combined Ratio


Combined Ratio Breakup – Listed Companies

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Loss and Expense Ratio

Loss Ratio 30-Sep-2018 Expense Ratio 30-Sep-2018


G&A Expense Ratio

The highest expense ratio for the nine months ended 2018 of 67%(Q3-2017: 153%) is reflected by UIC, whereas the lowest expense ratio of 10%(Q3-2017 : 14%) is reflected by MEHTAQ. Weighted Average expense ratio was at 22%(Q3-2017: 23%).

As may be expected, larger companies that have business scale have lower expense ratio, as they have sufficient business to absorb the cost base.

The expense ratios have been calculated as a ratio of general and admin expenses to net earned premium. For Takaful companies we have used the same for comparative purposes and ignored the wakala fees (as wakala fees is a positive in one account and a negative in the other).

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G&A Expense Ratio

G&A Expense Ratio 30-Sep-2018 Weighted Average Ratio


Commission Expense

The highest commission expense ratio in the nine months to 2018 of 42% is reflected by SALAMA, whereas the lowest expense ratio of -21% is reflected by DHAFRA. Weighted Average expense ratio was at 6%.

The commission expense considered is the net commission (commissions paid less commissions earned); a negative ratio signifies that the commissions earned outweigh the commissions paid. In UAE market, it is common practice for companies to cede out large proportion of commercial lines business and benefit from the reinsurance commissions, which is also evidenced by the low net commission ratio. It is felt that there is an inherent need to optimize reinsurance arrangements so that companies can benefit from underwriting profitable business without passing the risk and reward to reinsurers and just acting as fronting partners; at the same time not effecting their solvency position.

𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏 𝑬𝒙𝒑𝒆𝒏𝒔𝒆 𝑹𝒂𝒕𝒊𝒐 =𝑵𝒆𝒕 𝑪𝒐𝒎𝒎𝒊𝒔𝒔𝒊𝒐𝒏𝒔

𝑵𝒆𝒕 𝑬𝒂𝒓𝒏𝒆𝒅 𝑷𝒓𝒆𝒎𝒊𝒖𝒎

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Commission Expense Ratio 30-Sep-2018 Weighted Average Ratio


Return on Equity – Trend

The shareholders of the listed Insurance Companies have experienced a steadily increasing Return on Equity over the 4 year period. The weighted average return on equity was at 8.6%during nine months to 2018 as compared to 7.6% during 2017.

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Return on Equity 4 year Trend


Return on Equity – Listed Companies

The highest return on equity for nine months to 2018 is 18% is shown by MEHTAQ, whereas the lowest return on equity of -8% is reflected by AKIC.

Weighted average return on equity was at 8.6%.

The return on equity have been calculated as a ratio of net profit of nine months of 2018 to total shareholder’s equity as at the beginning of 2018.

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Total premiums written, by the listed insurance companies, in the nine months of 2018 amounted to AED 17.1 billion, as compared to the premium written in the corresponding period of 2017 of AED 16.8 billion which shows a growth of 2.0%. The average premium retention ratio was at 45%.

Total Profit, by the listed insurance companies, in the nine months of 2018 amounted to AED 1,420 million, compared to the profit of the corresponding period of 2017 of AED 1,092 million which shows a growth of 30.0%.

The weighted average return on equity was 8.6%. This is an increase from 7.6% weighted average return on equity in 2017.

Average loss ratio for all companies analyzed was 59% and average combined ratio was at 89%. This is an improvement from 2017 where the loss and combined ratio averaged to 63% and 91%respectively.

Conclusion


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As companies concentrate on Social Media we thought of undertaking a benchmarking on Facebookpopularity of companies. Similar dashboards can be implemented in your company and you maycontact us for more information


Awards

Badri Management Consultancy is proud to have been awarded the Actuarial/RiskManagement Consultancy Services provider of the year at the MENAIR Insurance Awards2016 and 2018

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https://www.eiseverywhere.com/ehome/287766/678811/https://www.eiseverywhere.com/ehome/142580/325377/


Points to Note

We have undertaken an analysis of the Key Performance Indicators (KPIs) of the Listed Insurance Companies of UAE for the nine months ended September 30, 2018. The data has been extracted from nine month ended 2018 financial statements of those companies which were publicly available. While we have tried to ensure accuracy in the data input and evaluation process, in view of the natural scope for human and/or mechanical error, either at input or during analysis, we accept no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of this publication. If you come across an error or have a query, do write to us.

In certain cases, we needed to combine certain items together for comparison purposes. E.g. Where XOL Reinsurance Premium has been shown separately we have added it to Reinsurance Premium expense and deducted from Net Earned Premium.

Some of the companies have restated their financials, as a result of implementation of new Financial Regulations for Insurance Companies whereas other companies have decided to absorb the part / whole impact in the current year. For companies who have restated, the restated profit/loss for 2017 and 2016 have been used for analysis purposes.

Due to limited information we are unable to segregate between life and non-life. Once all companies start publishing financial statements as per the new Financial regulations this can be done.

The list of companies is provided on the next pages.


Listed Insurance Companies

Sr. No. Symbol Name Market Sr. No. Symbol Name Market Sr. No. Symbol Name Market

1 AAAICAl Ain Al Ahlia Insurance Co.

ADX 11 DARTAKAFULDar al Takaful (Takaful House)

DFM 21 ORIENT Orient Insurance PJSC DFM

2 ABNICAl Buhaira National Insurance Company

ADX 12 DHAFRAAl Dhafra Insurance Co.

ADX 22 RAKNICRas Al Khaimah National Insurance Co.

ADX

3 ADNICAbu Dhabi National Insurance Co.

ADX 13 DINDubai Insurance Co , PSC

DFM 23 SALAMAIslamic Arab Insurance Company

DFM

4 AFNICAl Fujairah National Insurance Co.

ADX 14 DNIRDubai National Insurance & Reinsurance Co.

DFM 24 SICOSharjah Insurance Company

ADX

5 AKICAl Khazna Insurance Co.

ADX 15 EICEmirates Insurance Co.

ADX 25TAKAFUL-EM

Takaful Emarat (PSC) DFM

6 ALLIANCE Alliance Insurance DFM 16 GCICGreen Crescent Insurance Company

ADX 26 TKFLAbu Dhabi National Takaful Co. PJSC

ADX

7 AMANDubai Islamic Insurance and Reinsurance Co.

DFM 17 IHInsurance House P.S.C

ADX 27 UIC United Insurance Co. ADX

8 ASCANAArabian Scandinavian Insurance Co.

DFM 18 METHAQMethaq Takaful Insurance Co.

ADX 28 UNIONUnion Insurance Company

ADX

9 ASNICAl Sagr National Insurance Company

DFM 19 NGINational General Insurance Company

DFM 29 WATANIANational Takaful Company

ADX

10 AWNICAl Wathba National Insurance Co

ADX 20 OICOman Insurance Company (P.S.C.

DFM 30 OUTFLOrient UNB Takaful PJSC

DFM

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CONTACT

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Phone: +971-4-3207-250Fax: +971-4-3207-260

[email protected]

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Performance Analysis of UAE Listed Insurance Companies for ...badriconsultancy.com/wp-content/uploads/2019/07/Performance-An… · The top 5 companies had a combined premium of AED