UAE: Local listed insurers' 2015 combined results in the red
Source: Middle East Insurance Review | Apr 2016
Preliminary disclosures of UAE national insurers listed on the Abu Dhabi Securities Exchange and Dubai Financial Market have shown marked deterioration in operating performance, with the market making losses in 2015. This is in stark contrast to the robust performance of the market in 2014, said A.M. Best.
Preliminary results of the listed insurers for 2015 indicate a combined market loss of approximately AED106 million (US$28.9 million), compared to profits of AED859 million in 2014. The rating agency said many listed insurers in the UAE have suffered a triple hit from a deterioration in underwriting performance due to intense price competition, weakened investment performance due to the effect of the decline in oil prices on equity markets, and reserve requirements as prescribed by the Insurance Authority.
Mr Mahesh Mistry, Director, Analytics, said: “The UAE market is intensively competitive, with a large number of insurance companies chasing a limited pool of premium. Many of them have management keen to gain market share and improve their economies of scale through growth. As such, many insurers are still chasing top-line growth over profitability.” There are 60 insurance companies in the UAE.
The report also stated that UAE insurers maintain relatively aggressive investment portfolios that will continue to result in volatile investment performance, affecting operating performance and balance sheet strength. Capital buffers have reduced as a result of 2015 performance. With the inherent volatility in asset prices, any further deterioration may have a negative impact on the balance sheet strength of some insurers.
The largest losses were reported by three insurers: Islamic Arab Insurance (SALAMA) with a loss of AED162.8 million in 2015 compared to a profit of AED36.7 million in 2014, Al Sagr National Insurance (ASNIC) with a loss of AED150.2 million in 2015 compared to profits of AED56.1 million in 2014, and Abu Dhabi National Insurance (ADNIC) which saw losses widen to AED334.5 million in 2015 from AED280.4 million in 2014.
Several companies, however, managed to show increases in net profits. Among them, Orient Insurance reported the highest net profits last year of AED272 million, an improvement on its profits of AED252 million in 2014.
AED1 = US$0.27