The premium income of the UAE's listed insurers continued to grow while investment income saw a sharp decline in the first half of this year, according to a report published by Dubai-based actuarial consulting firm Badri Management Consultancy.
Despite the outbreak of COVID-19, GWP for the UAE’s 29 listed insurers grew by 5% to AED14.3bn ($3.9bn) in the first half of this year against AED13.6bn in the same period of 2019
Total profit for the first six months of this year reached AED945m against AED985m for the first half of 2019, showing a drop of 4%.
Total comprehensive income for the period stood at AED3.8m against AED1bn in the first half of 2019 depicting a decline of 99.3% primarily due to investment revaluations.
The average loss ratio for the listed insurers stood at 56% in 1H2020 (2019-H1: 60%) and average combined ratio was 86% (2019-H1: 90%).
The report attributes the decline in profitability to reduced investment yields and booking of losses, writing business at more competitive rates/discounts and increase in expenses in order to enable work-from-home facilities. Other factors putting pressure on profitability include the cost of the claims in the life and medical portfolios due to the pandemic, as well as claims for business interruption and other general and administrative expenses related to COVID-19.
Overall, four out of the 29 listed companies posted losses in 1H2020. Of the remaining 25 companies that posted profits, only one suffered a loss in 1H2019.
Second half of 2020
The second half of 2020 may bring its own challenges as it started with certain TPAs closing down (leaving an estimated AED100m of debt), the Insurance Authority clamping down on capitation business and a major restatement of the accounts by a leading company to the tune of AED80m 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 pricing. Otherwise, while 2020 may end on a positive note due to lower loss ratios, 2021 will prove a difficult year as discounted premiums are accompanied by higher claims.