QIC Group posts net profit of USD 130 million for the first nine months of 2018 – Underwriting performance impacted by natural and man-made catastrophe losses – International

Oct 24, 2018 (0) comment


Gross written premiums for the nine months reach USD 2.6 billion

Qatar Insurance Group, the leading insurer in Qatar and the Middle East North African (MENA) region reports a net profit of USD 130 million for the first nine months of 2018. The MENA markets continued to produce stable premiums with underwriting profitability, weathering geopolitical headwinds in the region. Consistent with previous quarters, QIC Group’s international operations further expanded in select low volatility classes whilst shedding underpriced (severity) business. Compared with the first nine months of 2017, the Group’s gross written premiums expanded by 6% to USD 2.6 billion. QIC Group reported a combined ratio of 102% for the first nine months of 2018 which included natural and man-made catastrophe losses incurred in Q3 as well as reserve additions related to some older contracts in discontinued segments of business reported in the first quarter. Excluding any prior-year reserve developments as well as natural and man-made catastrophe losses, the underlying combined ratio came in at 99.2%.

Commenting on the financial performance for the first nine months of 2018, Mr. Khalifa Abdulla Turki Al Subaey, Group President & CEO of QIC Group stated, “The third quarter of 2018 saw a string of major catastrophes losses, especially in the US and Japan. Still, rate increases remain elusive as the growth of alternative capital with lower return hurdles places secular and not just cyclical pressure on (re)insurance margins in the low frequency high severity space. Against this backdrop, we continue rebuilding our book of business towards low volatility characteristics, focusing on clients who pursue an innovative and analytical approach to product development and underwriting.”

He further continued, “This transformation process unfolds as we have to deal with challenges beyond our control such as the geopolitical situation in the Middle East and the vagaries of global re/insurance loss and pricing cycles. Therefore, QIC Group is redoubling its efforts to excel in an area which counts among our historical strengths: Cost-efficiency. In that respect, we consider ourselves a forerunner among our global peers some of which have recently embarked on major restructuring plans.”

Overview of key financial results

Figures, in USD million 9M 2018 9M 2017
Gross written premiums 2,623 2,464
Net written premiums 2,263 1,995
Net underwriting result* 104 (28)
Non-life combined ratio 102.0% 108.2%
Net profit 130 85
Earnings per Share (in USD) ; 2017 restated 0.32 0.26
Net investment result 169 219
Figures in USD million 9M 2018 Q4 2017
Total assets 11,017 9,542
Market capitalization 3,318 3,962
Shareholders’ equity 2,150 2,203

*Net underwriting result is defined as net earned premium reduced by the sum of (i) gross claims paid, (ii) reinsurance recoveries, (iii) movement in outstanding claims, (iv) net commission expense, and (v) other insurance income.

Financial performance

In the first nine months of 2018 QIC Group recorded growth in gross written premiums (GWP) of 6% to USD 2.6 billion, compared to the same period of the previous year.

The Group’s international carriers namely Qatar Re, Antares and QIC Europe Limited (QEL) posted a GWP growth of 11%. QIC Group ’s domestic and MENA operations growth remained stable, while the Company’s Life and Medical insurance subsidiary, QLM, headquartered in Doha, and OQIC, the Group’s listed subsidiary in Oman, continued to expand. Further impetus for growth arose from the ongoing digitalization of the Group’s MENA retail pillar. QIC Group’s international subsidiaries in Bermuda, the UK and Malta accounted for approximately 76% of the Group’s total GWP.

The Group’s net underwriting result increased to USD 104 million, compared with a negative USD 28 million for the same period last year, the third quarter of which saw the devastating series of hurricanes Harvey, Irma and Maria. QIC Group diligently applies its strengthening reserving governance and philosophy, resulting in a more cautious view of ultimate loss projections and a slower release of prior-year IBNR reserves. QIC Group is constantly expanding its low severity high frequency business which now constitutes a significant portion of the total portfolio.

QIC Group reported a combined ratio of 102% for the first nine months of 2018. The current year’s combined ratio reflects Qatar Re’s and Antares’ share in hurricane Florence and typhoon Jebi in September (with industry-wide insured losses expected to exceed USD 10 billion). In addition, Antares was impacted by a major marine loss in Germany (Lürssen shipyard). Excluding any prior-year reserve developments as well as natural and man-made catastrophe losses, the nine months 2018 combined ratio was 99.2%.

Investment income came in at USD 169 million in the first nine months of 2018, compared with USD 219 million in the same period of the previous year. The 23% y-o-y decline is mainly attributed to certain one-off investment gains booked in H1 2017. Further reclassification of certain types of investment securities following the adoption of IFRS 9 from 1 January 2018 resulted in increased mark-to-market losses in the first nine months of 2018.

QIC Group’s current investment return amounted to an annualized 4.7%, compared with 6.5% for the same period of 2017. The Group’s investment performance remains unrivalled by any of its peers. Overall, the Group’s net profit for the first nine months of 2018 stood at USD 130 million, an increase of 54% compared with the USD 85 million recorded in the same period last year.

Operational efficiency

During the reporting period, QIC Group further improved its already exceptional operational efficiency. In the first nine months of 2018 the administrative expense ratio for its core operations came in at 6.5%, further down from 6.6% in the same period of the previous year. The Group continues to reap the benefits from its ongoing endeavor towards process efficiencies and automation.

Further cost-efficiency gains are expected from the envisaged integration of back office operations across QIC Group’s international entities.

Regulatory update

In July, QIC Group consummated the acquisition of the Markerstudy Group Insurance companies (announced in January) through its subsidiary Qatar Re. This transaction is a milestone in the Group’s shift towards low volatility business.

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