Total profits generated by 32 branches of foreign insurance companies operating in the UAE declined by 60% to AED236 million (US$64.25 million) in 2016 from AED593 million ($161.45 million) in 2015, according to a performance analysis of UAE insurance companies by Dubai-based Badri Management Consultancy.
This was despite the fact that total premiums written by the branches rose 5.5% to AED11.55 billion in 2016 from AED10.95 billion in 2015.
On the other hand, the 29 locally incorporated listed insurers showed a turnaround in their performance when they reported total combined profits of AED988 million in 2016 against a loss of AED54 million (restated) for 2015.
Total premiums of the listed insurance companies rose to AED18.8 billion in 2016, from AED17 billion in the previous year, an increase of 10.6%. Among them, 19 recorded growth in premium volumes in 2016 as compared to the previous year, while 10 companies saw premiums plummet.
Of the 29 insurers, 17 are listed on the Abu Dhabi Securities Exchange and 12 on the Dubai Financial Market.
Overall, premiums written by the listed companies and the branches of foreign insurers for 2016 amounted to AED30.4 billion against AED27.9 billion for 2015, recording a growth of 8.6%.
The top 5 in the UAE insurance industry
For the UAE insurance sector as a whole, the top five insurers in terms of GWP had a combined premium of AED12.4 billion for 2016 against AED11.5 billion for 2015 and their combined market share shrank marginally from 41.3% to 40.8%.
They were Oman Insurance, Orient, MetLife, Abu Dhabi National Insurance Co (ADNIC) and AXA Gulf, the same companies that were in the top five in 2015. Of the top five companies in 2016, two were foreign branches and among the top 10, five were branches. This clearly reflects that foreign branches have a significant presence in the UAE insurance market.
While the average loss ratio of 62% for the foreign branches was lower than the 71% of the 29 listed local insurers, the combined ratios show that local companies (98%) produced better profitability as compared to foreign branches (101%).
The top five listed companies in 2016 in terms of GWP were Oman Insurance, Orient, ADNIC, Emirates Insurance and Al Ain Al Ahlia Insurance. There was a change in rankings as Badri's previous report showed that the top five in 2015 were: Oman Insurance, Orient, ADNIC, Emirates Insurance and Islamic Arab Insurance (Salama).
The highest growth in premiums in 2016 was shown by Arabian Scandinavian Insurance with an increase of 65% over 2015. The biggest decline in premiums in 2016 was recorded by United Insurance with a decrease of 37% over 2015.
The top five foreign branches -- MetLife, AXA Gulf, Life Insurance Corporation (International), Qatar Insurance, Arab Insurance Group -- had a combined premium of AED7 billion for 2016 as compared to AED6.7 billion in 2015. Their market share in 2016 was around 61% of total gross written premium for branches.
The weighted average retention ratio for listed companies was 47% (2015 : 42%) and that for foreign branches was 74% (2015 : 68%) , making the overall combined ratio 57% against 50% for 2015. This shows that generally the branches retained more business as compared to local companies.
The highest retention ratio among listed companies for 2016 was that of Methaq Takaful Insurance at 84%, whereas Dubai Insurance showed the lowest retention ratio of 23%. The weighted average retention ratio was 47% against 42% for 2015.
Among foreign branches, the highest retention ratio of 100% was reflected by Iran Insurance and the lowest of 23% by Friends Provident International. Some branches have reinsurance arrangements through their head office while others have large fronting portfolios.
Orient booked the highest profit for 2015 and 2016 of AED279 million and AED316 million respectively. ADNIC displayed a contrasting change in fortunes in 2016 as compared to 2015 as it registered a profit of AED205 million for 2016 against a loss of AED334 million for 2015, which was due to a decrease in retention ratio, meaning more business was ceded to reinsurers. At the same time, its claim management practices have improved from the previous year.
The 2016 profitability rankings for the UAE insurance industry show that the top 10 were: Orient, MetLife, ADNIC, Zurich International Life, Emirates Insurance, Oman Insurance, American Home Insurance, Al Ain Al Ahlia Insurance, Friends Provident International and Al Wathba National Insurance.
Return on equity
Among listed companies, Abu Dhabi National Takaful showed the highest return on equity at 20% for 2016 and the lowest ROE of -22% was reflected by Khazna Insurance. Weighted average return on equity for listed companies stood at 6.4%.
The loss makers
Six companies -- Union Insurance, Green Crescent Insurance, Dubai Islamic Insurance & Reinsurance, Insurance House, Islamic Arab Insurance (Salama) and Al Khazna Insurance -- posted losses in 2016, as compared to 13 insurers in 2015.
The highest growth in profit in 2016 was chalked up by Methaq Takaful Insurance when it reported net gains of AED9.3 million against AED700,000 for 2015, recording a whopping increase of 1,243%. The highest increase in losses was reported by Dubai Islamic Insurance and Reinsurance where losses plummeted by 639% from AED2.7 million in 2015 to AED20 million in 2016.
Life Insurance Corporation (International) and Oriental Insurance Company booked large losses in 2016. “If we consider the branches without LIC and Oriental, then the other branches have reported a 10% growth in profits yoy,” the report said.UAE: Foreign branches’ profits down 60% despite premium growth