The total profits generated in the UAE for 2019 amounted to AED1.6bn ($435.7m) for listed insurers and to AED620m for foreign branches, according to an analysis by Badri Management Consultancy.
Combined profits for listed insurers and foreign branches grew by a significant 20% to AED2.2bn for 2019 from AED1.8bn for 2018, said the report, ‘Performance Analysis of UAE insurers (including foreign branches) for the year 2019’.
Orient Insurance led in terms of profits for four consecutive years, including 2019 when its profits amounted to AED432m, an increase of 7% from 2018.
Last year, the aggregate profits for the five most profitable listed insurers stood at AED1.1bn, accounting for 69% of listed insurers’ profits. Among them, Oman Insurance showed the fastest growth in profits, growing by 1,377% from AED13m in 2018 to AED190m in 2019.
The report showed that three out of the 30 listed companies posted losses in 2019. Of the 27 profitable companies, three made losses in 2018.
Foreign branches
The total profits of foreign insurance branches jumped by 26% y-o-y to AED621m in 2019. Five out of the 22 foreign branches analysed made a loss in 2019 of which two made losses in 2018 as well.
Insurers that recorded underwriting losses were able to minimise the impact of such losses with investment income, the report said.
The analysis of the 2019 financial performance of the UAE insurance industry by Badri is based on 30 listed insurers and 22 foreign insurance branches.
Impact of COVID-19
Since a nationwide lockdown was imposed in the UAE in late March to curb the spread of COVID-19, the impact of the pandemic on insurance business is expected to first be realised in the second quarter of this year, the report said.
The resulting liquidity issues in the economy may cause insurance receivables to spike up, increasing the credit risk of insurers.
Generally, the impact of the pandemic on the insurance industry has taken many forms, including reduced business activities leading to a drop in the topline, fluctuations in interest rates, low investment returns or investment losses, delayed reporting and settlement of claims, and changes in the claims frequency, with the severity of the impact dependent on the class of business.
COVID-19 has also compelled insurance underwriters to go through the terms and conditions of covers provided for pandemic clauses. There may be other areas of potential impact that are still uncertain which will be realised over time, the report added. M
AED1 = $0.27