UAE Insurance Sector Ministry of Economy report

[sharewadi]

According to articles in the local press today, the Ministry of the Economy has released a report on the UAE insurance sector in the UAE. Trying to find the actual report is not so easy. The UAE government portal, government.ae, doesn't have it as far as I can see, and their link to the MOE website doesn't seem to go anywhere.

Looks like their webmaster has a bit of work to do - date of last report I could find was 2004. And sending a message via the feedback form resulted in a message saying the feedback form was not available. Good morning ...

Anyway, there's a sector that's forecast to grow at a greater rate than the average GDP growth rate. Could be an interesting bunch of shares to look at. Although another article (I think the Gulf News) points out that insurance companies are highly exposed to local equities - hence a big drop in profits last year when the UAE stock markets crashed.

Emirates Today 20 Aug 2007:

Insurance sector growth at double the GDP rate PARAG DEULGAONKAR BUSINESS REPORTER Premiums in the general and life insurance sectors jumped by more than 30 per cent last year, as industry experts forecast the market will grow 18 to 20 per cent per annum for the next three years. Premium income in the general insurance sector rose to Dh8.66 billion last year compared to Dh6.65bn in the previous year, while life and investment insurance hit Dh1.65bn from Dh1.2bn, according to statistics from the UAE Ministry of Economy. National companies accounted for 76.5 per cent of the premiums generated in the general insurance market, while foreign companies’ share reached 23.5 per cent. “The development of economic, constructional and social activities in the state has positively reflected on the insurance sector,” the ministry said in a report. The percentage of national companies retention of underwriting premiums in general insurance was 47 per cent. The total investment in the UAE insurance sector was Dh17.27bn last year, with 48 companies operating within this sector. Although the insurance market in the Middle East is lagging behind other financial services sectors in the region, the region offers immense scope for existing as well as new players and is expected to grow at a compound growth rate of 18 to 20 per cent in the near future, Dublin-based Research and Markets Group said. It attributed growth to the highly untapped market, rising awareness levels, growing health consciousness and a slew of initiatives taken by governments in the region. Turkey raised the highest premium among all the Middle East countries, followed by Iran and the UAE, while Oman remained at the lowest position in 2004 and 2005. In terms of growth, UAE took the lead with a year-on-year growth rate of 27.38 per cent in 2006 followed by Turkey at 23.68 per cent. According to Mahmoud Nadjoumi, Chief Executive Officer, Nexus Insurance Brokers, there is great demand for life insurance and mortgage protection products. “These areas are totally untapped and we see huge growth potential here. We expect the market to grow at double the rate of the country’s gross domestic product,” he told Emirates Today. Only five to six companies are operating in life insurance, which offers a virgin market for growth, he said. Bancassurance will emerge as a big opportunity in the region and opportunities for the car insurance market will rise, as the number of new cars rolling on to the roads grows at an appreciable rate. The rise of Takaful, or Shariah-compliant insurance, is expected to open up a world of opportunities for the insurance segment.

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[sharewadi]

Gulf News 20 Aug 2007:

UAE insurance companies highly exposed to equities By Ahmed A. Elewa, Staff Reporter Abu Dhabi: UAE insurance companies remain highly exposed to the equity market, according to a report issued by the Ministry of Economy. The total invested funds in the insurance sector amounted to Dh17.27 billion in 2006, of which 57.1 per cent was in the form of shares and bonds, followed by 28.2 per cent as deposits, the report said. "The ministry's report indicates many positive developments for the sector, yet it only presents a partial perspective," said Mohammad Al Baali, managing editor of Dubai-based Insure magazine. He said the concentration of 57.1 per cent of the investments in equities and bonds indicates the continuation of loss accumulation given the current bleak condition of UAE markets. "An independent research carried out by Dubai-based Dialogue Publishing reveals the decline of gross profits for 23 listed UAE insurance companies during 2006 by more than 60 per cent, despite a 12 per cent growth in technical revenues," he said. Growth reviews The report reviews the growth in premiums, recording 30 per cent in general insurance to Dh8.6 billion in 2006 from Dh6.6 billion the previous year, while the total average of claims fell from 63 per cent in 2005 to 50.7 per cent last year. "However, there is no explanation for the huge stake of 76 per cent held by foreign insurance companies in the life, savings, and money making insurance segments, compared to 23.5 per cent by local companies," Al Baali added. The Ministry of Economy announced earlier this year that it will work on a general framework for insurance companies' investment vehicles, reflecting the authorities' concern about the high exposure of the insurance sector to the fluctuations of stocks. According to market experts, investing in stock markets can seriously affect the profitability and net-worth of the investing company. "Short-term investments in stock markets strongly affect the profitability of the investing company, while long-term investments affect the shareholders' equity," said Nabeel Farhat, a managing director, Al Fajr Securities. Nevertheless, with the absence of alternative investment vehicles for insurance companies, the stock markets will remain the most attractive resort, according to Al Baali. Investor focus "There are very few companies, less than five, placing funds in bonds or real estate, while the majority focus on stocks," he added. The first-half financial results of UAE-based insurance companies indicate that many of these companies have gone through painful restructuring of their balance sheets after writing off the losses incurred from the stock market crash last year.

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[sharewadi]

And here's the KT report. So between the three articles, we should have just about enough information to recreate the MOE report . Interesting to see the different headlines. KT and ET say big growth, GN says big exposure to equities...

Khaleej Times 20 Aug 2007:

UAE insurance sector registers commendable growth in 2006 BY HASEEB HAIDER ABU DHABI — The premiums of general insurance in the UAE increased from Dh6.654 billion in 2005 to Dh8.661 billion in 2006 registering an increase of 30 per cent. In its sector performance report on insurance industry for 2006, the ministry of economy discussed in detail business trends and growth in premiums, an impact of double digit economic growth. The report asserts the significance of insurance sector and its substantial role in the national economy due to the huge funds invested there in, which amounted to Dh17.270 billion in 2006 while the value of underwriting premiums at the insurance market amounted to Dh10.312 billion. The development of economic, construction and social activities in the country have positively reflected on the insurance sector. The rationalisation policy adopted by the insurance companies had a positive impact on the reduction of the total average of claims during 2006 as the average has dropped from 63 per cent during 2005 to 50.7 per cent during 2006. The total of the underwriting premiums for life, savings, money making insurances amounted to Dh1.651 billion. The share of the national companies in these premiums accounted for 23.7 per cent while the foreign companies share accounted for 76.3 per cent. The total of the underwriting premiums in general insurance was Dh8.661 billion and the share of national companies in these premiums accounted for 76.5 per cent while the foreign companies share accounted for 23.5 per cent. The rate of each of the general insurance branches was as follows: 55.5 per cent in accidents and liability,14.7 per cent in fire,14.1 per cent in land, sea and air transport, 3.5 per cent in other risks and 12.2 per cent in medical insurance. The percentage of national insurance companiesretention of underwriting premiums in general insurance branch was 47 per cent. The retention percentage for each branch was as follows: 60.3 per cent in accidents and liability branch, 31 per cent in fire branch, 16 per cent in land, sea and air transport branch, 8 per cent in other risks branch and 61 per cent in medical insurance branch. The claims ratio for general insurance branch before the deduction of re-insurance share accounted for 50.7 per cent in 2006 against 63 per cent in 2005. The claims ratio in each branch was as follows: 54.7 per cent in accidents and liability branch, 55.2 per cent in fire branch, 26.9 per cent in land, sea and air transport branch, 20.1 per cent in other risks branch and 67 per cent in medical branch. The total technical reserves for life, saving, money making and general insurance amounted to Dh7.005 billion. The total shareholders equity in the national insurance companies amounted Dh11.337 billion. The total invested funds amounted to Dh17.270 billion — 57.1 per cent of this amount was in the form of shares and bonds followed by 28.2 per cent as deposits.

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