Listed insurance companies in the UAE posted a spectacular profit growth of 76% during the first quarter of 2021 when compared with the corresponding period of 2020, with total pre-tax profits amounting to AED681m ($185m) for 1Q2021, according to a report by Badri Management Consultancy, an actuarial consulting firm in the Middle East.
Of the 29 listed insurers whose financial results were analysed, only two showed losses in 1Q2021. In contrast, nine insurers posted losses in their financials for 1Q2020. The report says that Al Khazna Insurance (AKIC) is excluded from the analysis since the insurer’s 1Q2021 financial results had yet to be published as of the date of compilation of the report.
The five biggest insurers in terms of pre-tax profits in 1Q2021 were: Orient Insurance, Abu Dhabi National Insurance (ADNIC), Oman Insurance (OIC), Al Wathba National Insurance (AWNIC) and Dubai Insurance (DIN).
In the first three months of this year, the fastest profit growth was generated by Fidelity United (609%) while Al Sagr National Insurance (ASNIC) reported the biggest decline of 205%, when compared with the first quarter of 2020.
1Q2020 was hit by falling equity markets due to the onset of COVID and that is the reason for the large variation in financial performance. The market recovered later during the year. Thus the 76% growth in profit was achieved from a low base in 1Q2020.
AWNIC showed the biggest absolute change in profits. In 1Q2020, the insurer was hit by an AED78m loss in investments. Excluding the 1Q2021 profit growth of AWNIC, the other 28 insurers would have reported a 40% increase in profit in 1Q2021.
The average loss ratio for the 29 listed insurers stood at 59% for 1Q2021 (YE 2020: 58%).
The listed insurance companies reported a 1% growth in premium income to AED 8.9bn during the first three months of 2021 when compared with the corresponding period of 2020.
The combined premium of the top five companies amounted to AED5.5bn in 1Q2021, contributing 62% to the overall market. However, this market share has dropped by one percentage point when compared with 1Q2020.
Among the 29 listed insurers in Badri’s analysis, only 11 of them displayed premium growth while the other 18 experienced a decrease in the topline in 1Q2021.
A 3% decline is observed in the net premiums earned by the insurance companies during the first quarter of 2021. Net premiums amounted to AED2.5bn in 1Q2021, when compared with 1Q2020 when net premiums totalled AED2.6bn.
The weighted average retention ratio stood at 38% for the first three months of 2021. This ratio was around 40% for the full year of 2020.
The highest retention rate was displayed by TAKAFUL-EM (88%) while the lowest retention rate was exhibited by DIN (14%).
Although there may be exceptions, retention ratios are generally indicative 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 retention rates. 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.
Total comprehensive income for 1Q2021 reached AED902m, turning around from the corresponding period of 2020 when a net loss of AED778m was reported. The turnaround reflects a huge improvement in the investment portfolios of the companies.
In 1Q2020, almost all of the listed companies recorded losses in their other comprehensive income account. However, only seven companies made losses in 1Q2021.