PERFORMANCE ANALYSIS OF UAE LISTED INSURANCE …€¦ · 30/6/2019 · recorded by AWNIC. This year Insurance companies have shown a better performance in terms of profits where

PERFORMANCE

ANALYSIS OF

UAE LISTED

INSURANCE

COMPANIES FOR

H1 2020

AUGUST 22, 2020

ABOUTBADRI

MANAGEMENTCONSULTANCYBadri Management Consultancy is the

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HIGHLIGHTS FROM 2019-H1 REPORT

Gross premiums writtenGross premiums written by the listed insurance companies in 2019-H1.

Retention ratioThe weighted average retention ratio in 2019-H1 for listed companies was 41%

ProfitEstimated profit for listed companies amounted to AED 985 million in 2019-H1.

Loss Ratio

Weighted Average loss ratio was for the

period 2019-H1 stood at 60% for listed

companies of UAE.

Return on EquityWeighted average return on equity for 2019-H1 was at 6%




PERFORMANCE RATIOS

6

Despite the outbreak of COVID-19 and the lockdown in the state for most of Q2-2020, the listed

companies of UAE recorded a growth in top line during 2020-H1. While the weighted average loss

and combined ratio reflect a favorable declining trend, the adverse impact of the pandemic is evident

from the investment income which has observed a sharp decline from 12% to 6% during the period.

80

%

10

3%

72

%

97

%

63

%

91

%

59

%

89

%

60

%

90

%

56

%

86

%

LOSS RATIO COMBINED RATIO

MANAGEMENT COST RATIOS2015-Q2 2016-Q2 2017-Q2 2018-Q2 2019-Q2 2020-Q2

9%

3%

-1%

17

%

15

%

6%

3%

5%

11

%

9%

-1%

-1%

5%

2%

1%

GW P GROW TH NW P GROW TH NEP GROW TH

GROWTH RATIO

2016-Q2 2017-Q2 2018-Q2 2019-Q2 2020-Q2

7%

12%1

5%

13%

18%

10%

21%

9%

21%

12%

19%

6%

N E T P R O F I T / N E P I N V E S T ME N T I N C O ME / N E P

EARNING RATIO2015-Q2 2016-Q2 2017-Q2 2018-Q2 2019-Q2 2020-Q2




Total Gross premium written by the listed insurance companies amounted to AED 14.3 billion

during 2020-H1, depicting a growth of 5% from the corresponding period of 2019.

The market share of the top 5 companies in terms of the gross premium increased from 58% in

2019-H1 to 60% during the half year ended 2020. The combined premium of the top 5

companies adds up to AED 8.6 billion for 2020-H1.

The ranking in top 5 remains unchanged with ADNIC securing the top market rank in terms of

highest written premium as of 2020-H1.

7

GROSS WRITTEN PREMIUMS

The highest growth for 2020-H1 was exhibited by Fidelity United with 82% growth from the

corresponding period of 2019 and on the contrary, the biggest decline in written business was

reflected by METHAQ, from AED 168 million to AED 117 million reflecting a dip of 30% in the

business written.

Overall, of the 29 listed Companies, 15 companies displayed an increase in premiums over

previous period, while 14 companies saw premium decline.

9% 14%

3%

9% 9%

0

1,000

2,000

3,000

ADNIC ORIENT OIC ABNIC SALAMA

AE

D M

illio

ns

TOP 5

GWP 2019-H1 GWP 2020-H1

9%-3%

-2% -12%

7% -8%-18%

11%26%-18%45% 4% 15% -9% 82% 1% 4% -8% -12%-14%-30%

-16%-2% -3%

0

100

200

300

400

500

600

700

800

AA

AIC

EIC

UN

ION

DIN

NG

I

TA

KA

FU

L-E

M

RA

KN

IC

AS

NIC

DA

RT

AK

AF

UL

TK

FL

AW

NIC

WA

TA

NIA

OU

TF

L

DN

IR

UF

I

DH

AF

RA IH

AF

NIC

AL

LIA

NC

E

AM

AN

ME

TH

AQ

AS

CA

NA

SIC

O

GC

IC

AE

D M

ILL

ION

S

OTHERS

GWP 2019-H1 GWP 2020-H1




The total net premiums earned by the listed insurance companies amounted to AED 4.9 billion,

an increase of 1.2% from AED 4.8 billion from the corresponding period of 2019.

The earned premiums of top 5 companies amounted to AED 2.7 billion, which accounts for 55%

of the market share for 2020-H1 (2019-H1: 57%).

8

NET EARNED PREMIUMS

The highest growth for the period 2020-H1 was reflected by DARTAKAFUL with a growth of

approximately 100% from the corresponding period of 2019, while the biggest decline in net

earned premiums was exhibited by SICO.

-1%

6%

-5%

-17%

-4%

0

100

200

300

400

500

600

700

800

900

OIC ADNIC ORIENT SALAMA EIC

AE

D M

ILLIO

NS

TOP 5

NEP 2019-H1 NEP 2020-H1

33% 23%

-13%37%100%

-3% -16%0% 19%

6% 5%-18% 5%

72% -8% -25% 3% -27% -3%39%-11%

6%

-13%-32%

0

50

100

150

200

250

TA

KA

FU

L-E

M

RA

KN

IC

UN

ION

AS

NIC

DA

RT

AK

AF

UL

NG

I

AA

AIC

AF

NIC

WA

TA

NIA

AB

NIC

AW

NIC

TK

FL IH

UF

I

AL

LIA

NC

E

DIN

DN

IR

ME

TH

AQ

AS

CA

NA

AM

AN

DH

AF

RA

OU

TF

L

GC

IC

SIC

O

AE

D M

ILLIO

NS OTHERS

NEP 2019-H1 NEP 2020-H1




PREMIUMS TREND

Growth of 5% in gross written premium

can be witnessed when compared to

half year ended 2019.

The highest growth over the last 5 half

year periods was witnessed in 2017-

H1 due to IA imposed minimum tariffs

for Motor LOB that were materially

higher than the existing rates and new

benefits for the Industry.

The historical performance of Net

Earned Premiums has exhibited

identical trends to that of gross written

premiums for similar reasons.

The business written by the listed

companies in the Emirates is mainly

short-term and is earned on pro-rata

basis, therefore, the significant growth

of GWP in 2017-H1 is reflected in

both, 2017 and 2018 financial years

for net earned premiums. The Net

earned premium in 2020-H1 has

depicted a growth of 1.2%.

9

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0

1

1

2

2

3

3

4

4

5

5

2015-H1 2016-H1 2017-H1 2018-H1 2019-H1 2020-H1

AE

D B

ILLIO

NS

NET EARNED PREMIUM - TREND

NEP GROWTH

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

2

4

6

8

10

12

14

16

2015-H1 2016-H1 2017-H1 2018-H1 2019-H1 2020-H1

AE

D B

ILLIO

NS

GROSS WRITTEN PREMIUM GROWTH TREND

GWP GROWTH %




CONVENTIONAL VS. TAKAFUL

Out of 30 listed insurance

companies, 9 operate as Takaful

Insurers in the UAE market.

The business written by the

Takaful companies contributes

15% of the total written

business by the listed insurance

companies in UAE since 2018.

The premium growth for the

Takaful insurers has stagnated in

2020-H1 declining by 1% (13%

in 2019-H1).

On the contrary, the shareholder

profits for Takaful Insurers

reflected exceptional increase of

23% for 2020-H1 when

compared with the

corresponding period of 2019-

H1 which recorded a decline of

10%.

The growth in terms of both

gross business and profits have

dropped down to 6% (8% in

2019-H1) and -8% (5% in

2019-H1) respectively for

Conventional Insurers.

10

-1%

6%

23%

-8%-10%

-5%

0%

5%

10%

15%

20%

25%

TAKAFUL CONVENTIONAL

BUSINESS GROWTH FOR CONVENTIONAL & TAKAFUL INSURERS

PREMIUM GROWTH PROFIT GROWTH

11

12

12

2

22

0

2

4

6

8

10

12

14

16

GWP 30-JUN-2018 GWP 2019-H1 GWP 2020-H1

AE

D B

ILL

ION

S

TAKAFUL & CONVENTIONAL BUSINESS DISTRIBUTION

CONVENTIONAL TAKAFUL




RETENTION RATIO

The retention ratio has been calculated as a ratio of net written premiums to gross written

premium.

The weighted average retention ratio for 2020-H1 was recorded at 41%, depicting a stable trend

from the historical declining trends (2019-H1 at 41%, 2018-H1 at 46%, 2017-H1 at 45% and

2016 at 47%).

As per the IA benchmark the recommended range for retention ratio is above 45%, while the

preferred range is above 75%. The red zone reflects the companies falling in critical range which

is below 45%.

The highest retention of 81% for the half year ended 2020 is reflected by TAKAFUL-EM while the

lowest retention of 15% was reflected by DIN.

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.

11

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

TA

KA

FU

L-E

M

AS

CA

NA

AS

NIC

AF

NIC

AW

NIC

DA

RTA

KA

FU

L

GC

IC

SA

LA

MA

WA

TA

NIA

RA

KN

IC IH

ME

TH

AQ

AL

LIA

NC

E

UF

I

SIC

O

EIC

OIC

AM

AN

NG

I

UN

ION

TK

FL

DN

IR

AD

NIC

OR

IEN

T

OU

TF

L

DH

AF

RA

AA

AIC

AB

NIC

DIN

RETENTION RATIO

RETENTION RATIO 2020-H1 WEIGHTED AVERAGE RETENTION RATIO




PROFIT BEFORE TAX

The public listed insurance companies have

experienced a decreasing trend in profits

over the years. A sizeable growth was

observed in 2017 when compared to

2016 after the IA implemented minimum

tariffs.

ORIENT secured the top rank in terms of

recording highest profits consecutively for

4 years with profits amounting to AED

291 million in 2020-H1, an increase of

7% from 2019-H1 (AED 271 million).

The profit for the TOP 5 companies

accumulates to AED 701 million making

74% share of the listed insurance

companies of UAE profit.

SALAMA has moved from bottom 10 in

2019-H1 into Top5 Companies in 2020-

H1 with a growth of profits 31% while

others have maintained their ranks.

AWNIC and Takaful-EM witnessed a decline

of 861% and 351% respectively and

moved their books from profitable to loss

making for the period 2020-H1. In

contrast, OUTFL recorded profits this year,

after posting losses in 2019-H1.

12

7%

60%

5%

31% -4%

0

50

100

150

200

250

300

350

ORIENT ADNIC OIC SALAMA EIC

AE

D M

ILL

ION

S

TOP 5 COMPANIES BY PROFIT

PROFIT 2019-H1 PROFIT 2020-H1

38%

-118% -351%-148.1%

-861%-100

-80

-60

-40

-20

0

20

40

GCIC METHAQ TAKAFUL-EM UNION AWNIC

AE

D M

ILL

ION

S

BOTTOM 5


-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0

200

400

600

800

1,000

1,200

2016-H1 2017-H1 2018-H1 2019-H1 2020-H1A

ED

MIL

LIO

NS

PROFIT GROWTH TREND

PROFIT GROWTH




PROFIT BEFORE TAX

Total profit generated for 2020-H1 amounted to AED 945 million, a decline of 4% when

compared with AED 985 million recorded in 2019-H1 (restated from AED 1.02 Billion).

The highest growth in profits was recorded by DARTAKAFUL, a growth of 388%, from AED 1.1

million profit in 2019-H1 to AED 5.4 million in 2020-H1. Where the biggest decline for the period

was witnessed for AWNIC of 861%, from generating profit of AED 10.5 million in 2019-H1 to a

loss of AED 79.8 million reported in 2020-H1 due to losses reported from Investments.

During the period 2020-H1, EIC has reported restated Financial position stating that the net

profits of the Company were misstated from 2016 onwards. The impact of such correction for the

half year 2019 has reduced their profits from AED 90 million to AED 55 million for the first half of

2019.

It is observed that 4 out of the 29 listed companies posted losses in 2020-H1. Of the remaining

25 companies that posted profits, only 1 of them had loss making books in 2019-H1.

13

4%

9%

-24% -19% 0%

9%

0%128% 4%

136%

-25%5% -19%

29% 388%-91%

117% 129% -92%

-10

0

10

20

30

40

50

TK

FL

DN

IR

DIN

DH

AF

RA

AA

AIC

AB

NIC

ALLIA

NC

E

AS

CA

NA

AF

NIC

WA

TA

NIA

AS

NIC

AM

AN IH

RA

KN

IC

DA

RT

AK

AF

UL

NG

I

UF

I

OU

TF

L

SIC

O

AE

D M

ILLIO

NS

OTHERS





PROFIT BEFORE TAX – 3 YEAR TREND

The above is sorted with reference to the combined net profits and shows the ranking for

the companies based on their total profits over the last three years, in order to compare

stability of returns. Orient is significantly ahead of the industry when it comes to the 3 half-

year profitability. AWNIC, on the other hand, experienced a significant loss in 2020-H1 with

declining profit trend when compared to corresponding periods. (2019-H1: -80%, 2020-

H1: -861%). EIC profits show restated values for 2019-H1 & 2020-H1 only.

14

-200

-100

0

100

200

300

400

500

600

700

800

900

OR

IEN

T

AD

NIC

OIC

SA

LA

MA

EIC

TK

FL

DN

IR

DIN

DH

AF

RA

AA

AIC

AB

NIC

AL

LIA

NC

E

AS

CA

NA

AF

NIC

WA

TA

NIA

AS

NIC

AM

AN IH

RA

KN

IC

DA

RT

AK

AF

UL

NG

I

UF

I

OU

TF

L

SIC

O

GC

IC

ME

TH

AQ

TA

KA

FU

L-E

M

UN

ION

AW

NIC

AE

D M

ILLIO

NS

3 YEAR PROFIT COMPARISION

PROFIT 2018-H1 PROFIT 2019-H1 PROFIT 2020-H1




PROFIT ANALYSIS

The above is sorted by profits before investment income.

Investment Income has contributed in generating profits for most of the Companies during

2020-H1.

15

0

50

100

150

200

250

300

350

ORIENT ADNIC OIC SALAMA EIC

AE

D M

ILL

ION

S

TOP 5 COMPANIES

PROFIT BEFORE INVESTMENT 2020-H1 INVESTMENT INCOME 2020-H1

-150

-100

-50

0

50

100

TK

FL

AS

NIC

DH

AF

RA

AW

NIC

AA

AIC

AF

NIC

DIN

AS

CA

NA

AB

NIC

DN

IR

WA

TA

NIA

UN

ION

NG

I

IH

DA

RT

AK

AF

UL

RA

KN

IC

SIC

OAE

D M

ILL

ION

S REMAINING COMPANIES


-8

-6

-4

-2

0

2

4

6

GCIC UFI METHAQ OUTFL TAKAFUL-EM

AE

D M

ILL

ION

S

BOTTOM 5 COMPANIES





PROFIT COMPOSITION

It can be observed that most of the insurance companies that recorded losses from their

underwriting business were able to minimize the impact from investment income, although four

companies have posted underwriting surplus but investment losses (for two of them, this pushed

their profitability for the period into red).

There is a room for improvement in underwriting strategies in the market because companies

should target underwriting income to be their primary source for generating profits.

From the historic performance analysis, it is observed that investment income plays a significant

role in generating profits for the Companies, and the fall in investment returns in 2020-H1 has

impacted quite a few companies.

Investment Income contributes a significant role in underwriting activities for Companies writing

considerable Life business and since the financials are not segregated into Life and Non-life

business segment, the performance is presented on overall Company level. Therefore, for the

companies writing significant top line through Life portfolio like Aman and Alliance, these are

excluded from this review as the results might not reflect the accurate comparative picture.

16

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

OR

IEN

T

AD

NIC

OIC

SA

LA

MA

EIC

TK

FL

AS

NIC

DH

AF

RA

AW

NIC

AA

AIC

AF

NIC

DIN

AS

CA

NA

AB

NIC

DN

IR

WA

TA

NIA

UN

ION

NG

I

IH

DA

RT

AK

AF

UL

RA

KN

IC

SIC

O

GC

IC

UF

I

ME

TH

AQ

OU

TF

L

TA

KA

FU

L-E

M

PROFIT COMPOSITION - UNDERWRITTING & INVESTMENT INCOME





PREMIUM BENCHMARKED ON THE BASIS OF PROFITABILITY

17

Of the top 10 Companies by gross

business written, 5 have a lower rank

when benchmarked on the basis of

profitability.

ADNIC, Orient, OIC, SALAMA and EIC have

all built up large and profitable portfolios..

CompanyRanking

IndicGross Premium Profit

ADNIC 1 2 (1)

ORIENT 2 1 1

OIC 3 3 -

ABNIC 4 11 (7)

SALAMA 5 4 1

AAAIC 6 10 (4)

EIC 7 5 2

UNION 8 28 (20)

DIN 9 8 1

NGI 10 21 (11)

TAKAFUL-EM 11 27 (16)

RAKNIC 12 19 (7)

ASNIC 13 16 (3)

DARTAKAFUL 14 20 (6)

TKFL 15 6 9

AWNIC 16 29 (13)

WATANIA 17 15 2

OUTFL 18 23 (5)

DNIR 19 7 12

UFI 20 22 (2)

DHAFRA 21 9 12

IH 22 18 4

AFNIC 23 14 9

ALLIANCE 24 12 12

AMAN 25 17 8

METHAQ 26 26 -

ASCANA 27 13 14

SICO 28 24 4

GCIC 29 25 4




PREMIUMS & PROFIT ANALYSIS

The summary of premium and profitability growth in 2020-H1 from the corresponding period of

2019 is illustrated above. Companies exhibiting premium and profitability growth rate outside of

the +-50% and +-100% range are capped respectively.

18

ADNIC

ORIENTOIC

ABNIC

SALAMA

AAAIC

EIC

UNION

DIN

NGI

TAKAFUL-EM

RAKNIC

ASNIC

DARTAKAFUL

TKFL

AWNIC

WATANIA

OUTFL

DNIR

UFI

DHAFRA

IH

AFNIC

ALLIANCE

AMAN

METHAQ

ASCANA

SICO

GCIC

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%

GW

P G

RO

WT

H

PROFIT GROWTH




EARNING RATIOS

Profit Margin is computed as net profit on every unit of net earned premium.

The highest margin of 76% is depicted by DHAFRA while the lowest of negative 84% is

demonstrated by AWNIC for 2020-H1.

The weighted average net profit margin for the half year ended 2020 was recorded to be

at 19% exhibiting a decline from 21% in 2019-H1.

AWNIC is removed from the above presentation to avoid distortion as it was acting as an

outlier with a negative 84% margin.

19

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

DH

AF

RA

DN

IR

TK

FL

OR

IEN

T

DIN

AS

CA

NA

AL

LIA

NC

E

AB

NIC

AD

NIC

AA

AIC

AF

NIC

EIC

AM

AN

SA

LA

MA

WA

TA

NIA

OIC IH

SIC

O

AS

NIC

OU

TF

L

GC

IC

DA

RT

AK

AF

UL

RA

KN

IC

UF

I

NG

I

TA

KA

FU

L-E

M

ME

TH

AQ

UN

ION

PROFIT AS % OF NET EARNED PREMIUM

PROFIT MARGIN 2020-H1 PROFIT MARGIN 2019-H1

WEIGHTED AVERAGE 2020-H1 WEIGHTED AVERAGE 2019-H1




EARNING RATIOS

Profit Margin from Investment income is computed as Investment Income on every unit of net

earned premium.

The weighted average profit margin from investment activities for 2020-H1 works out to be 6%,

depicting a decline from 12% recorded during 2019-H1. ALLIANCE recorded the highest profit

margin from investment income, hence mounting to the top position.

AWNIC recorded exceptionally low margin of -100% for the period and therefore, is excluded from

the presentation above.

20

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

ALL

IAN

CE

DN

IR

AB

NIC

DIN

OR

IEN

T

DH

AFR

A

SIC

O

TKFL

ASC

AN

A

OU

TFL

GC

IC

AA

AIC

AD

NIC

OIC EIC

SALA

MA

UFI

AFN

IC

WA

TAN

IA

DA

RTA

KA

FUL IH

RA

KN

IC

TAK

AFU

L-EM

AM

AN

MET

HA

Q

NG

I

UN

ION

ASN

IC

PROFIT MARGIN FROM INVESTMENT INCOME

PROFIT MARGIN 2020-H1 PROFIT MARGIN 2019-H1

WEIGHTED AVERAGE 2020-H1 WEIGHTED AVERAGE 2019-H1




NET TECHNICAL PROVISIONS

The Net Technical Reserves as at half year ended 2020 remained stable with an insignificant increase

of 0.6% when compared with the corresponding period of 2019.

OIC in term of booking technical provisions secured the highest rank, and although the sequence is

slightly changed, 7 out of the top 10 companies remain the same.

21

0%

-6%

-3%

8%

1%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

OIC ADNIC ORIENT AMAN EIC

AE

D M

ILL

ION

S

TOP 5 COMPANIES BY NET TECHNICAL PROVISIONS

CLAIMS RESERVES 2019-H1 CLAIMS RESERVES 2020-H1

-6%-2%

50%

3%

5% -11%-2%26%81% 3% -13%-2% -9%-29%-7%

51% 3% 2% -11%

0

100

200

300

400

500

600

700

ALLIA

NC

E

SA

LA

MA

TA

KA

FU

L-E

M

TK

FL

NG

I

AA

AIC

UN

ION

AW

NIC

DA

RT

AK

AF

UL

AS

NIC

RA

KN

IC

AB

NIC

AF

NIC

ME

TH

AQ

WA

TA

NIA

UF

I

DN

IR IH

DH

AF

RA

AS

CA

NA

DIN

OU

TF

L

GC

IC

SIC

O

AE

D M

ILLIO

NS

REMAINING COMPANIES BY NET TECHNICAL PROVISION

CLAIMS RESERVES 2019-H1 CLAIMS RESERVES 2020-H1




NET RESERVES AS A PERCENTAGE OF NET WRITTEN PREMIUMS

Aman, Alliance and TKFL were observed to be outliers and excluded from the above analysis. Aman

and Alliance booked Individual Life Mathematical reserves amounting to AED 769 million and AED

536 million respectively.

The proportion of individual Life mathematical reserves to net reserves is 89% and 95% for Aman

and Alliance respectively, which represents a relatively significant proportion in comparison to other

life companies who have large portfolio of individual life business. Whereas TKFL reflected Net

technical provision as a proportion of NWP as 443% where the significant portion of technical

provisions constitutes of Unearned premiums.

22

0%

40%

80%

120%

160%

200%

240%

280%

DH

AF

RA

ME

TH

AQ

SIC

O

GC

IC

EIC

AA

AIC

NG

I

TA

KA

FU

L-E

M

OIC

DN

IR

AD

NIC

AF

NIC

AS

CA

NA

OR

IEN

T

AW

NIC

DA

RT

AK

AF

UL

AB

NIC

OU

TF

L

UF

I

RA

KN

IC IH

UN

ION

WA

TA

NIA

AS

NIC

SA

LA

MA

DIN

RESERVES AS % OF NET WRITTEN PREMIUMS




LOSS & COMBINED RATIO

23

The weighted average loss and combined ratio

stood at 56% and 86% respectively, with SICO

bearing the highest combined ratio of 108%.

The lowest combined ratio was experienced by

DHAFRA of 43%.

For Takaful companies we have consolidated

the Policyholders and Shareholders P&L for

comparative purposes.

A company is deemed profitable from an

underwriting perspective if the combined ratio

is well below 100%, thus the companies falling

in green zone are considered profitable from

their underwriting activities.

Loss ratio is computed as Net Claims Incurredover Net Earned Premium

Combined ratio is calculated as ratio of Net

Claims Incurred along with the expenses and

net commissions over Net Earned Premium.

The Loss and Combined ratio

exhibited a decreasing trend

over the years except for 2019-

H1 which experienced a slight

increase.

80%72%

63% 59% 60% 56%

103%97%

91% 89% 90% 86%

0%

20%

40%

60%

80%

100%

120%

2015-H1 2016-H1 2017-H1 2018-H1 2019-H1 2020-H1


LOSS RATIO COMBINED RATIO

0%

20%

40%

60%

80%

100%

120%

SIC

O

OU

TFL

GCIC

ALLIA

NCE

METH

AQ

TAKAFU

L-E

M

UFI

RAKN

IC

DARTAKAFU

L

ABN

IC IH

OIC

UN

ION

NG

I

SALAM

A

WATAN

IA

EIC

AW

NIC

AFN

IC

AM

AN

AAAIC

AD

NIC

ASN

IC

DN

IR

DIN

ASCAN

A

ORIE

NT

TKFL

DH

AFRA


LOSS RATIO 2020-H1 COMBINED RATIO 2020-H1

WEIGHTED AVERAGE LOSS RATIO WEIGHTED AVERAGE COMBINED RATIO




LOSS & EXPENSE RATIO

24

It is observed that few companies have low loss ratios, but the expenses push the combined

ratio above the 100% mark.

Fidelity United, SICO and GCIC have loss ratios well below 55%, however, the expenses push

the combined ratio above 100% resulting in an underwriting loss for the Company.

The above graph is sorted in terms of loss ratio.

0%

20%

40%

60%

80%

100%

120%

ME

TH

AQ

TA

KA

FU

L-E

M

AB

NIC

DA

RT

AK

AF

UL

RA

KN

IC

OIC

NG

I

IH

AD

NIC

AS

NIC

AL

LIA

NC

E

AA

AIC

EIC

WA

TA

NIA

OU

TF

L

AM

AN

UF

I

AF

NIC

OR

IEN

T

GC

IC

SIC

O

AS

CA

NA

AW

NIC

DH

AF

RA

UN

ION

DN

IR

TK

FL

SA

LA

MA

DIN

LOSS & EXPENSE RATIO

LOSS RATIO 2020-H1 EXPENSE RATIO 2020-H1




EXPENSE RATIO

25

The expense ratio has witnessed a gradually increasing trend up to 2018-H1 and has remained

stable since then to around 30%.

The Insurance Authority has provided the industry with benchmark expense ratio where the optimal

range is below 30% while expenses above 35% are not preferred and actions should be taken to

bring them within the defined ranges.

The expense ratio is computed as all the expenses net of commissions recorded for the period by

the companies including other operational expenses as a proportion of net earned premiums.

23%

25%

28%

30%30% 30%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2015-H1 2016-H1 2017-H1 2018-H1 2019-H1 2020-H1

EXPENSE RATIO 6 - YEAR TREND

EXPENSE RATIO OPTIMAL RANGE CRITICAL RANGE




EXPENSE RATIO

26

The weighted average General & Administrative expense ratio of the industry for 2020-H1

works out to be 7%, a slight decrease when comparing to the corresponding period of 2019

which was 8%.

The highest expense ratio of 26% for the period 2020-H1 is reflected by SICO while the lowest

expense ratio of 4% is reflected by ABNIC. It is commonly believed that G&A expense ratio

should be analyzed on the basis of gross written premium for the Company hence, the same is

included in our analysis.

As may be expected, larger companies that have extensive business scale have lower expense

ratio, as they have sufficient business to absorb the cost base. The expense ratio is worked out

as:

Expense Ratio = General and administrative expense / Gross Written Premium

0%

5%

10%

15%

20%

25%

30%

SIC

O

AF

NIC

AL

LIA

NC

E

GC

IC

AS

CA

NA

ME

TH

AQ

AM

AN IH

AW

NIC

NG

I

UN

ION

DH

AF

RA

UF

I

TA

KA

FU

L-E

M

DA

RT

AK

AF

UL

RA

KN

IC

WA

TA

NIA

EIC

AS

NIC

SA

LA

MA

AA

AIC

TK

FL

DN

IR

OIC

DIN

OU

TF

L

OR

IEN

T

AD

NIC

AB

NIC

G&A EXPENSE AS A RATIO OF GROSS WRITTEN PREMIUM

G&A EXPENSES RATIO 2020-H1 WEIGHTED AVERAGE RATIO




EXPENSE RATIO

27

The highest expense ratio of 89% for the period 2020-H1 is reflected by SICO whereas the lowest

expense ratio of 12% is exhibited by ASNIC. The weighted average G&A expense ratio of the

industry for 2020-H1 works out to be 22%.

The expense ratio is worked out as:

Expense Ratio = General and administrative expense / Net Earned Premium

For Takaful companies, same has been used for comparative purposes and Wakala fees is ignored,

as Wakala fees is positive in one account and negative in the other

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SIC

O

GC

IC

DIN

AL

LIA

NC

E

DH

AF

RA

AA

AIC

AM

AN

UN

ION

AF

NIC

ME

TH

AQ

NG

I

OU

TF

L

AB

NIC

UF

I

AW

NIC IH

OR

IEN

T

DN

IR

EIC

AS

CA

NA

OIC

AD

NIC

WA

TA

NIA

TK

FL

TA

KA

FU

L-E

M

SA

LA

MA

DA

RT

AK

AF

UL

RA

KN

IC

AS

NIC

G&A EXPENSE AS A RATIO OF NET EARNED PREMIUM

G&A EXPENSES RATIO 2020-H1 WEIGHTED AVERAGE RATIO




EXPENSE RATIO

28

The highest commission ratio of 45% for half year ended 2020 is depicted by SALAMA

whereas the lowest commission ratio is reflected by DHAFRA with a ratio of negative 31%.

The weighted average commission ratio is recorded to be 7%.

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, it is common practice for the companies to cede out large

proportion of commercial lines business and benefit from the reinsurance commissions, which

is also evident 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 re-insurers and just acting as fronting partners; at the same time not effecting their

solvency position.

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

SA

LA

MA

DN

IR

UF

I

AS

NIC

GC

IC

DA

RT

AK

AF

UL

RA

KN

IC

EIC

TA

KA

FU

L-E

M

AS

CA

NA

OU

TF

L

WA

TA

NIA

OIC

TK

FL

AW

NIC

UN

ION IH

AM

AN

AL

LIA

NC

E

AF

NIC

OR

IEN

T

AD

NIC

NG

I

ME

TH

AQ

AA

AIC

AB

NIC

SIC

O

DIN

DH

AF

RA

COMMISSION EXPENSE RATIO

Commission Expense Ratio 2020-H1 Weighted Average Ratio




RETURN ON EQUITY

29

The shareholders of the listed insurance companies have experienced an increasing and stable trend in

return on equity since 2016-H1. However, the period 2020-H1 observed a slight reduction.

The weighted average return on equity stood at 5% with WATANIA depicting the highest return

on equity of 18%; AWNIC on the other hand, observed to have the lowest returns of negative

10%.

The return on equity is calculated as a ratio of net profit recorded for a period to shareholders’

equity at the beginning of the period.

-15%

-10%

-5%

0%

5%

10%

15%

20%

WA

TA

NIA

TK

FL

AM

AN

OR

IEN

T

DH

AF

RA

AD

NIC

AS

CA

NA

AF

NIC

DN

IR

SA

LA

MA

DIN

OIC IH

AL

LIA

NC

E

EIC

AB

NIC

DA

RT

AK

AF

UL

RA

KN

IC

AA

AIC

AS

NIC

UF

I

OU

TF

L

NG

I

GC

IC

SIC

O

ME

TH

AQ

UN

ION

TA

KA

FU

L-E

M

AW

NIC

RETURN ON EQUITY FOR LISTED COMPANIES

ROE 2020-H1 WEIGHTED AVERAGE RATIO

0%

1%

2%

3%

4%

5%

6%

7%

2016-H1 2017-H1 2018-H1 2019-H1 2020-H1

RETURN ON EQUITY TREND




0%

20%

40%

60%

80%

100%

120%

OU

TF

L

OR

IEN

T

RA

KN

IC

TK

FL

GC

IC

AS

CA

NA

AL

LIA

NC

E

UF

I

DH

AF

RA

AA

AIC IH

UN

ION

NG

I

AS

NIC

DA

RT

AK

AF

UL

DN

IR

WA

TA

NIA

AB

NIC

AW

NIC

EIC

AF

NIC

OIC

AD

NIC

DIN

SA

LA

MA

SIC

O

TA

KA

FU

L-E

M

AM

AN

ME

TH

AQ

CASH RATIO

CASH TO INVESTED ASSETS RATIO WEIGHTED AVERAGE CASH TO INVESTED ASSETS RATIO

CASH TO INVESTED ASSETS

30

The cash to invested assets of the industry averages around 35%.

OUTFL having the highest levels of invested assets maintained as cash, while the lowest cash

ratio was depicted by METHAQ at 7%.

The cash to invested assets ratio has been taken as the ratio of cash & deposits to total

invested assets.

As per the IA benchmarks, the cash to invested assets ratio for the companies should not fall

below 15% of the total invested assets while the optimal area is beyond 30%.




ASSET MIX

31

The prescribed range for Invested assets to total assets is 40% - 70% as per the Insurance

Authority, where the companies falling in critical range of below 40% are under red zone.

Asset Mix compares the proportion of invested assets and non invested assets for the period

2020-H1. GCIC has the highest proportion of 84% of their assets invested, while the OUTFL

has only invested 4% of their assets.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GC

IC

AW

NIC

AM

AN

AL

LIA

NC

E

SIC

O

AS

CA

NA

AF

NIC

SA

LA

MA

TK

FL

NG

I

DN

IR

DH

AF

RA

AB

NIC

AS

NIC

OIC

EIC

AD

NIC

TA

KA

FU

L-E

M

OR

IEN

T

RA

KN

IC

UF

I

IH

DIN

WA

TA

NIA

ME

TH

AQ

UN

ION

DA

RT

AK

AF

UL

AA

AIC

OU

TF

L

ASSET MIX

INVESTED ASSETS NON-INVESTED ASSETS




0%

20%

40%

60%

80%

100%

120%

140%

ME

TH

AQ

SIC

O

AB

NIC

UN

ION

DN

IR

RA

KN

IC IH

NG

I

DH

AF

RA

WA

TA

NIA

OR

IEN

T

AS

NIC

TA

KA

FU

L-E

M

DA

RT

AK

AF

UL

EIC

AD

NIC

AM

AN

AA

AIC

SA

LA

MA

AL

LIA

NC

E

OU

TF

L

UF

I

DIN

AF

NIC

AS

CA

NA

AW

NIC

OIC

GC

IC

TK

FL

INSURANCE RECEIVABLES

INSURANCE RECEIVABLE WEIGHTED AVERAGE

INSURANCE RECEIVABLES

32

The insurance receivables are computed as a ratio of Insurance receivables of the company over grosswritten premium of last 12 months.

The highest receivable ratio of 118% is reflected by METHAQ whereas the lowest receivables of

12% have been observed for TKFL.

The weighted average insurance receivables stood at 33% reflecting the Industry as a whole is

within the safe zone and 6 companies fall in the critical area with more than 45% of their GWP as

receivables.




TOTAL COMPREHENSIVE INCOME

The Indices of general market performance in the Stock Exchange (DFM/ADX) exhibited a declining

trend post the outbreak of COVID-19 the realization of the decline witnessed in Financial Market

is reflected through either profit & loss accounts or Other Comprehensive Income statements of

the Companies. The Total Comprehensive Income for half year ended 2020 exhibit a significant

decline of 99.6% when compared with the corresponding period of 2019.

Companies such as AAAIC, DHAFRA, SICO, DIN and DNIR recorded losses in the fair value of their

investments. Where the biggest loss for the period was recorded by AWNIC with total

comprehensive loss of AED 188 million for 2020-H1 reflecting decline of 897% from the

corresponding period of 2019 (loss of AED 18.8 Million). 6 out of the 29 companies recorded a

growth in terms of total comprehensive income for the half year ended 2020.

33

(50)

-

50

100

150

200

250

300

OR

IEN

T

AD

NIC

SA

LAM

A

OIC

TK

FL

AB

NIC

ALL

IAN

CE

ASC

AN

A

AFN

IC

ASN

IC

RA

KN

IC

WA

TAN

IA

NG

I

TA

KA

FUL-

…

OU

TFL

AM

AN

GC

IC IH

MET

HA

Q

DH

AFR

A

AA

AIC

UN

ION

UFI

SIC

O

DIN

EIC

DN

IR

AW

NIC

AED

Mill

ion

s

TOTAL COMPREHENSIVE INCOME - 2019-H1

Profit After Tax - 2019-H1 OCI - 2019-H1 Total Comprehensive Income - 2019-H1

(200)

(150)

(100)

(50)

-

50

100

150

200

250

300

OR

IEN

T

AD

NIC

SALA

MA

OIC

TKFL

AB

NIC

ALL

IAN

CE

ASC

AN

A

AFN

IC

ASN

IC

RA

KN

IC

DA

RTA

KA

FUL

WA

TAN

IA

NG

I

TAK

AFU

L-EM

OU

TFL

AM

AN

GC

IC

IH

MET

HA

Q

DH

AFR

A

AA

AIC

UN

ION

UFI

SIC

O

DIN

EIC

DN

IR

AW

NIC

AED

MIL

LIO

NS

TOTAL COMPREHENSIVE INCOME - 2020-H1

PROFIT AFTER TAX - 2020-H1 OCI - 2020-H1 TOTAL COMPREHENSIVE INCOME - 2020-H1




CONCLUSION

34

• Despite the pandemic and the ensuing lockdown in 2020-Q2, the overall performance of the

insurance sector in the first half of 2020 reflected a growth of 5% of premium volumes.

• The total premiums written by the UAE listed insurance companies during 2020-H1 amounted

to be AED 14.3 billion as compared to AED 13.6 billion of premiums written in 2019-H1 with

average retention ratio of 41% for the listed companies. While the total Profit for the half year

ended 2020 amounted to AED 945 million as compared to the half year ended 2019 which

was at AED 985 million.

• The average loss ratio for the listed companies analyzed in the report stood at 56% (2019-

H1: 60%) and average combined ratio was at 86% (2019-H1: 90%).

• The overall performance of the listed companies of insurance industry for the year has

presented a tough and ongoing ability to perform in the market. The major impact during the

six months period of 2020 was due to the decline observed in the financial markets which

strained Investment incomes for insurance Companies as evident from 6% of profit margin

from investments for 2020-H1 which was 12% in 2019-H1.

• While the published figures are not available by line of business, there has been a surge in

motor insurance business as the condition to get the vehicles tested for renewal was waived in

light of the lockdown, and a number of individuals took advantage of the same. At the same

time, the profitability has declined which can be attributed to four factors; (i) reduced

investment yields and booking of losses (ii) writing business at more competitive

rates/discounts (e.g. many insurance companies had announced special discounts on motor)

(iii) increase in expenses in order to enable work from home facilities, and (iv) the cost of the

claims on life and medical portfolios due to the pandemic, as well as claims for business

interruption and other G&A lines related to COVID-19.

• A few insurance companies also had resorted to reducing staff salaries by a certain percentage

for a period of 2-3 months during 2020-Q2 to control their costs. The second half of 2020

may bring its own challenges as it started with certain TPAs closing down (leaving an

estimated AED 100 million debt), the Insurance Authority clamping down on capitation

business and a major restatement by a leading company to the tune of AED 80 million citing

errors in previous years financials. The Authority has recently issued a circular requiring

Actuaries to examine Medical TPA agreements and report reductions of motor premiums below

the allowed minimum. There will be pressure on profitability and companies need to stop the

price war on Motor and revert to technical prices. Otherwise while 2020 may end in a positive

note due to lower loss ratios, 2021 will prove a difficult year as the discount premiums are

earned with higher claims.




KEY TAKE AWAY POINTS

INDUSTRY NEP GROWTH TIMELINE - COMPANIES

AED4.88bn

2019-H12016-H1 2017-H1 2018-H1 2020-H1

AED4.11bn

AED4.82bn

AED4.35bn

AED4.85bn

AED14.3bn

2019-H1

INDUSTRY GWP GROWTH TIMELINE - COMPANIES

2016-H1 2017-H1 2018-H1 2020-H1

AED 10.4bn

AED 13.6bn

AED12.2bn

AED12.5bn

INDUSTRY PROFIT GROWTH TIMELINE - COMPANIES

Highest Growth in GWP Recorded by

Fidelity United

at

82%

Highest Growth in Profit by

DARTAKAFULat

388%

Highest Retention Recorded by

TAKAFUL-EM at

81%

Highest ROE by

WATANIAat

18%

Highest Earned Premium by

OIC at

816mn

Highest GWP recorded by

ADNICat

2.56bn

Highest Investment Income recorded by

ORIENTat

173.2mn

AED944.8mn

2019-H12016-H1 2017-H1 2018-H1 2020-H1

AED607.4mn

AED985.4mn

AED796.1mn

AED997.9mn

35




COMPANIES INCLUDED IN THE ANALYSIS

36

Listed Insurance Companies

Sr. No. Symbol Name Market

1 AAAIC Al Ain Al Ahlia Insurance Co. ADX

2 ABNIC Al Buhaira National Insurance Company ADX

3 ADNIC Abu Dhabi National Insurance Co. ADX

4 AFNIC Al Fujairah National Insurance Co. ADX

5 ALLIANCE Alliance Insurance DFM

6 AMAN Dubai Islamic Insurance and Reinsurance Co. DFM

7 ASCANA Arabian Scandinavian Insurance Co. DFM

8 ASNIC Al Sagr National Insurance Company DFM

9 AWNIC Al Wathba National Insurance Co ADX

10 DARTAKAFUL Dar al Takaful (Takaful House) DFM

11 DHAFRA Al Dhafra Insurance Co. ADX

12 DIN Dubai Insurance Co , PSC DFM

13 DNIR Dubai National Insurance & Reinsurance Co. DFM

14 EIC Emirates Insurance Co. ADX

15 GCIC Green Crescent Insurance Company ADX

16 IH Insurance House P.S.C ADX

17 METHAQ Methaq Takaful Insurance Co. ADX

18 NGI National General Insurance Company DFM

19 OIC Oman Insurance Company (P.S.C. DFM

20 ORIENT Orient Insurance PJSC DFM

21 RAKNIC Ras Al Khaimah National Insurance Co. ADX

22 SALAMA Islamic Arab Insurance Company DFM

23 SICO Sharjah Insurance Company ADX

24 TAKAFUL-EM Takaful Emarat (PSC) DFM

25 TKFL Abu Dhabi National Takaful Co. PJSC ADX

26 UFI United Fidelity Insurance (PSC) ADX

27 UNION Union Insurance Company ADX

28 WATANIA National Takaful Company ADX

29 OUTFL Orient UNB Takaful PJSC DFM




Disclaimer

• We have undertaken an analysis of the Key Performance Indicators(KPIs) of the listed insurance companies operating in UAE for the halfyear ended June 30, 2020. The data has been extracted from thefinancial statements of those companies which were publicly listed andavailable till the compilation of this report therefore, AKIC is notincluded in this report.

• While we have tried to ensure accuracy in the data input and evaluationprocess, given the natural scope for human and/or mechanical error,either at input or during analysis, we accept no liability whatsoever forany loss or damage resulting from errors, inaccuracies or omissionsaffecting any part of this publication. If you come across an error or havea query, do write to us.

• In certain cases, we needed to combine certain items for comparisonpurposes. For example, where XOL Reinsurance Premium has beenshown separately, we have added it to Reinsurance Premium expenseand deducted from Net Earned Premium.

• Some of the figures for 2019-H1, as shown in this analysis differ fromthe ones shown in our report compiled for the period of June 30, 2019.This is because of the restatements of financials for some companies.

• Due to limited information, we are unable to segregate between life andnon-life. Once all companies start publishing financial statements withthis level of segregation, this can be done.

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PERFORMANCE ANALYSIS OF UAE LISTED INSURANCE …€¦ · 30/6/2019 · recorded by AWNIC. This year Insurance companies have shown a better performance in terms of profits where