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UAE insurers' profits to stay good in short, medium term

Waheed Abbas/Dubai
Filed on November 27, 2019 | Last updated on November 27, 2019 at 08.49 pm
UAE insurers will continue to demonstrate good profitability in the short to medium term, despite some pricing pressure.

Gross premiums written in Q3 2019 up 10% to Dh18.8B

UAE insurers will continue to demonstrate good profitability in the short to medium term as total gross premiums written by firms in the third quarter of 2019 grew 10 per cent to Dh18.8 billion compared to Dh17.1 billion in the same period last year.

Of the 30 companies considered, 18 displayed an increase in premiums while 12 saw a decline, Badri Management Consultancy said in its quarterly report.

The written premium of the top five companies amounted to Dh10.6 billion, which makes up 57 per cent of the market share for the third quarter. Adnic, Orient and OIC have maintained their positions in the top ranks.

Total net earned premiums written by listed insurance companies in the three-month period stood at Dh7.28 billion, a decrease of 0.8 per cent from Dh7.34 billion in the corresponding period of 2018.

The earned premium of the top five companies was Dh4.1 billion, which makes up 56 per cent of the market share.

Profit growths have declined over the period. In the third quarter of 2018, profit for the listed companies was at Dh1.42 billion; the current quarter resulted in profits of Dh1.37 billion, a 3 per cent decline from the corresponding period of 2018.

Moody's Investors Service said amendments to the UAE's unified motor policy, allowing insurers to discount their motor insurance prices, contributed to the deterioration in insurers' underwriting performance. Higher frequency of medical claims reported and medical price inflation was also a reason for the weakening of the underwriting results.

"Continued price discounting and slower economic growth will be a headwind for premium and profitability growth in the remainder of 2019 and 2020," said Harshani Kotuwegedara, associate analyst at Moody's Investors Service.

"We anticipate that UAE insurers will continue to demonstrate good profitability in the short to medium term, despite some pricing pressure. The top 10 players will likely continue to report 7-9 per cent premium growth in the short to medium-term, and combined ratios below 95 per cent. The smaller players will face tougher competition, with pricing pressure adversely affecting both growth and profitability margins," Kotuwegedara said.

- waheedabbas@khaleejtimes.com


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