Magazine

Nov 2019

Read the latest edition of AIR and MEIR as an Interactive e-book

Bahrain: Arig to cease underwriting despite positive 1Q2019 results

Source: Middle East Insurance Review | Jun 2019

Arab Insurance Group (Arig) has posted a consolidated net profit of $1.8m attributable to shareholders for the first quarter of 2019 (1Q2019) from $0.5m for the corresponding quarter in 2018 (1Q2018). Despite the improved performance, the board of directors announced that Arig would cease underwriting activities.
 
The 1Q2019 improved result was mainly due to higher consolidated investment income of $10.4m, more than double 1Q2018’s $5.1m as a result of positive global markets. The gains were partly offset by losses reported on Lloyd’s accounts which generated a technical loss of $4.6m, compared to a loss of $7.3m in 1Q2018, mainly due to high prudent initial year reserving.
 
Arig’s comprehensive income attributable to shareholders for 1Q2019 was $8.4m, against a loss of $3m in the same quarter last year.
 
The reinsurer’s technical result was a loss of $3.7m for the first three months of 2019, compared to a profit of $0.7m in the same period a year ago. While its traditional reinsurance portfolio produced a technical profit of $0.9m (1Q2018: $8.0m) representing a reduction of 89%, Lloyd’s accounts incurred a technical loss of $4.6m, a reduction of 37% from the corresponding quarter of 2018.
 
Arig’s underwriting result stood at $0.5m for the first quarter this year, compared to $0.03m in the corresponding quarter of 2018.
 
GWP during 1Q2019 reached $173.1m for the group, an increase of 2.4% from the same period in the previous year. Upward premium adjustments of the Lloyd’s portfolio were offset by a 12% decrease in the traditional reinsurance portfolio.
 
For the 2018 full year, Arig reported consolidated net loss of $55.3m attributable to shareholders, compared to a net profit of $7.2m in 2017. The negative result was mainly due to technical losses of $28.3m, against a loss of $19.6m in 2017, from its operations through Lloyd’s syndicates and a provision of $21.5m for likely losses at the subsidiary, Gulf Warranties.
 
Decision on underwriting
Separately, Arig said in a note to its condensed consolidated financial statements for 1Q2019 that the company’s board of directors in a meeting held on 13 May had resolved to cease underwriting activities subject to the approval of regulatory authorities and shareholders.
 
In a statement, the Central Bank of Bahrain (CBB) said it is currently reviewing the decision taking into consideration the legal and financial position of Arig and would investigate the actions taken by the board of directors in light of the instructions and directions issued by the CBB to the group on 16 April 2019. These instructions were as follows:
  • Appoint a permanent CEO to the company acceptable to the CBB. On an interim basis, appoint one of senior staff as the acting CEO of the company.
  • Suspend, with immediate effect, all decisions related to staff layoffs and business termination at overseas branches/offices/subsidiaries, until a clear action plan is submitted to the CBB.
  • Submit a clear business strategy on the way forward.
  • Fill all vacant core business function positions and other critical functions with suitable staff.
  • Seek a rating from a rating agency and work towards further business enhancement.
  • Release a statement on the strategic direction of the company once the same is discussed and agreed with the CBB.
  • The board should acquaint themselves with sound governance practices, and the trends and opportunities in insurance business.
The CBB said that suspension of trading in the company’s shares will remain until the completion of the investigation and the submission of a clear business strategy by the company to the regulator. M 
 
| Print | Share

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.

 

Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.