Qatar Insurance Company (QIC), the leading insurer in Qatar and the Middle East North African (MENA) region reports a net profit of USD 182 million for the financial year 2018. The MENA markets continued to produce stable premiums with underwriting profitability, weathering geopolitical headwinds in the region. QIC’s international operations entered a phase of consolidation, shifting the underwriting book to lower volatility classes whilst shedding underpriced (severity) business. Compared with the previous year, the Group’s gross written premiums for 2018 expanded by 8% to USD 3.5 billion. Including severe catastrophe losses incurred in Q3 and Q4, QIC reports a combined ratio of 101.3% for 2018, against 105.8% in the previous year. Excluding any prior-year reserve developments as well as natural and man-made catastrophe losses, the underlying combined ratio came in at 98.7%, which is considered healthy and consistent with QIC’s low-volatility bias.
Commenting on the financial performance for 2018, Mr. Khalifa Abdulla Turki Al Subaey, Group President & CEO of QIC Group stated, “For the global insurance industry, 2017 and 2018 were the costliest back-to-back years on record. Insurers and reinsurers had to digest catastrophe losses close to USD 230 billion. 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, our strategic decision, taken more than a year ago, to shift the underwriting focus to a lower volatility segment has proven right.”
He further continued, “This comprehensive de-risking was successfully completed towards the end of 2018 and we should be able to reap the fruit of this effort in 2019 and beyond. At the same time, as Qatar’s dominant insurer and a leading regional operator and investor, our Group is set to benefit from Qatar’s impressive recovery from the economic blockade that was imposed on the nation by some of its neighbouring countries in June 2017. For these reasons, we are cautiously optimistic for the remainder of the year even though global economic and industry uncertainties continue to loom large.”
|Figures in USD million||2018||2017|
|Gross written premiums||3,463||3,203|
|Net written premiums||2,970||2,624|
|Net underwriting result*||158||32|
|Net investment result||214||248|
|Consolidated net profit||182||116|
|Return on Equity||8.2%||5.1%|
|Non-life combined ratio||101.3%||105.8%|
|Earnings per Share (in USD); 2017 restated||0.49||0.31|
*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.
In 2018 QIC recorded growth in gross written premiums (GWP) of 8% to USD 3.5 billion compared to the same period of the previous year.
During the reporting period QIC further strengthened its position as a global player, with about three quarters of the Group’s revenues generated outside the MENA region. QIC now operates as an organisation with a local presence in 13 geographies across the Middle East, Europe, the Americas and Asia. The Group’s international carriers, namely Antares, Qatar Re, QIC Europe Limited (QEL) and Markerstudy posted GWP growth of 11% to USD 2.7 billion. Qatar Re now ranks 27th amongst the global top 50 reinsurers, up from rank no. 35 in 2016, according to international credit rating agency A.M. Best.
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. As a testament to QIC’s regional achievements, OQIC has been awarded “the best performing company in Small Cap” (below OMR 25 million) category in Oman. This prestigious award was announced by Alam al-Iktisaad Wal A’mal (AIWA), published by United Media Services in the Sultanate of Oman. In addition, on the back of superior product innovation and technological leadership QIC was recognized as the “Best Motor Insurance Company MENA 2018” at the Global Banking & Finance Review awards conducted by the Global Banking & Finance review magazine.
In 2018, the Group’s net underwriting result came in at USD 158 million, a steep increase of 401% compared with USD 32 million for the previous year, the third quarter of which saw a devastating series of major hurricanes (Harvey, Irma, Maria). QIC, in 2018, continued to record negative, albeit abating reserve developments on some older contracts in areas of business that are no longer within the company’s risk appetite and have been discontinued in line with its de-risking strategy. This process went according to plan and was completed at the end of 2018. Furthermore, QIC diligently applies its recently adopted strengthened reserving governance and philosophy, resulting in a more cautious view of ultimate loss projections and a slower release of prior-year IBNR reserves.
QIC posts a combined ratio of 101.3% for 2018, reflecting Qatar Re’s and Antares’ share in a number of hurricanes and typhoons as well as the unprecedented Californian wildfires later in the year. In addition, Antares was impacted by a major marine loss in Germany (Lürssen shipyard). On a normalized basis, excluding any prior-year reserve developments as well as natural and man-made catastrophe losses, the 2018 combined ratio came in at 98.7%. This robust underwriting performance is commensurate with QIC’s overall book of business and the ongoing shift towards lower volatility exposures. Low severity high frequency business now accounts for about 50% of QIC’s total underwriting portfolio, up from 42% as at December 31, 2017. QIC’s normalized underwriting performance also reflects the successful completion of a comprehensive re-underwriting and de-risking effort across its international operations.
For the full year 2018, investment income came in at USD 214 million, compared with USD 248 million in 2017. The y-o-y decline is mainly due to certain one-off investment gains booked in 2017. Also, a reclassification of certain types of investment securities following the adoption of IFRS 9 as from 1 January 2018 resulted in some mark-to-market losses.
QIC’s current investment return amounted to 4.6%, compared with 5.4% in 2017. It remains unrivalled by any of its peers.
Weathering heightened global market volatility and tightening monetary policy conditions, QIC’s investment team has once more performed exceptionally well, living up to the Group’s consistent track record of being a highly successful investment manager. It is owing to the team’s prudence and outstanding professional skills that QIC continues to be conferred many prestigious awards and titles. One example: The QIC GCC Equity Fund won the award for the best GCC fund performance in 2017 for a GCC fund with over USD 75 million in assets at the annual MENA Fund Manager Award ceremony in Dubai. The prestigious annual awards was organised by the MENA Fund Manager magazine and over fifty different funds entered the various competition categories.
During the reporting period, QIC further improved its already exceptional operational efficiency. In 2018 the administrative expense ratio for its core operations came in at 6.3%, down from 7.1% in the previous year. The Group continues to reap the benefits from its ongoing endeavor towards process efficiencies and automation.
Further cost-efficiency gains have started to accrue from the ongoing integration of back office operations across QIC’s international entities. In addition, a concerted approach to retrocession buying will benefit the Group’s underwriting result.
In total, improved underwriting results and resilient investment income translated into a consolidated net profit for 2018 of USD 182 million, compared with USD 116 million for the previous year.
As of 31 December 2018, QIC Group’s shareholders’ equity stood at USD 2.1 billion.
In July 2018, QIC consummated the acquisition of the Gibraltar-based Markerstudy Group Insurance companies (announced in January) through its subsidiary Qatar Re. This transaction is a milestone in QIC’s shift towards low volatility business and on its journey towards becoming a Global Top 50 Insurance Group. When the acquisition was announced in January 2018, Markerstudy underwrote more than 5% of the UK motor insurance market, generating annual premiums of about GBP 750 million. Through this acquisition Qatar Re has assumed a balanced portfolio in a line of business in which it has significant experience and understanding.
In line with QIC’s global expansion, the Group has further enhanced its capabilities in compliance, risk management and actuarial group wide systems to match global best practices. For QIC, Enterprise Risk Management (ERM) is a core element for its sustained success, comprising the three pillars of risk management, exposure management and capital management. One example is QIC’s diligent application of a strengthened and more conservative reserving governance and philosophy.
In 2018 QIC was reaffirmed with the coveted ‘A’ financial strength rating from Standard & Poor’s and A.M. Best. Both agencies explicitly recognized the Company’s ERM framework.
As part of the Group’s overall risk management approach QIC has also restructured its reinsurance retrocession programmes within the risk appetite approved by the Board of Directors. Current retrocession market conditions enable QIC to manage earnings volatility in a more cost-efficient way.