The UAE’s 30 listed insurers that generate about half of the country's written premiums, face a challenging 2018 due to the introduction of VAT and lower oil prices after having a profitable 2017, according to rating agencies AM Best and S&P Global Ratings.
The net profit of listed insurers surged 45 per cent to Dh1.3 billion in 2017 compared with Dh900 million a year earlier, thanks to compulsory medical insurance, particularly in Dubai and the Unified Motor Insurance Policy, S&P Global Ratings said. The main source of profitability is underwriting income, the rating agency said.
“This is a stark change compared with the past few years when insurers' net income was heavily reliant on investment income, with underwriting results being generally break-even,” it said.
Over 60 companies compete for business in the UAE insurance market. The Insurance Authority has issued a number of regulations over the past few years to strengthen the sector and prime it for future growth.
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Read more:
New travel insurance for Emiratis to fund up to Dh500,000 of treatment
Middle East insurers face headwinds yet opportunities abound amid low penetration, report says
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Total written premiums of insurers in the UAE, including unlisted companies, grew 12 per to reach Dh40bn in 2016, according to the Insurance Authority. Total revenue or gross written premiums of listed insurers rose 16 per cent to Dh22bn in 2017 from Dh19bn a year earlier, S&Psaid.
“Based on our analysis, we consider these improved results as a positive factor for the overall market,” said S&P. “That said, we do not see any immediate ratings impact on the UAE insurers that we rate, and credit conditions for each insurer may vary according to their individual performance.”
The market continues to be dominated by big players, with the top five insurers’ market share rising to 59 per cent in 2017 compared to 56 per cent in 2016. Orient Insurance also over took Oman Insurance Company as the largest insurer in the UAE last year, according to S&P.
“We continue to view the UAE insurance market as highly concentrated,” said S&P. “Orient Insurance not only contributed heavily to growth of the top five insurers but also became the No. 1 insurer (by gross premiums), registering a staggering 51 per cent increase in its premiums.”
However, the introduction of five per cent VAT on January 1 and continued low oil prices will weigh on the sector in 2018, according to rating agency AM Best. The agency maintains a negative outlook on the insurance market of the UAE. All insurance products, except for life, are subject to VAT.
“Some insurers have indicated that they will not pass on the VAT charge on unearned premium to retail customers, which could lead to temporary margin erosion," AM Best. "Additionally, continued low oil prices and reduced government spending will continue to affect equity and real estate asset prices, which will create volatility on the balance sheet and income statements of insurers with riskier investment strategies."
Moreover, higher premiums from an uptick in medical insurance will not recur in 2018, as the Dubai Health Authority compulsory medical insurance comes into full effect.
“Given that most corporates in the UAE are now compliant with the requirements of the DHA mandatory medical programme, premium volume growth in medical will not be as easy to achieve as was experienced in 2016 and 2017,” the agency said. “AM Best expects achieving growth to be more challenging in 2018, which could potentially lead to a return to heightened levels of price competition.”
RESULT
Leeds United 1 Manchester City 1
Leeds: Rodrigo (59')
Man City: Sterling (17')
Man of the Match: Rodrigo Moreno (Leeds)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Three tips from La Perle's performers
1 The kind of water athletes drink is important. Gwilym Hooson, a 28-year-old British performer who is currently recovering from knee surgery, found that out when the company was still in Studio City, training for 12 hours a day. “The physio team was like: ‘Why is everyone getting cramps?’ And then they realised we had to add salt and sugar to the water,” he says.
2 A little chocolate is a good thing. “It’s emergency energy,” says Craig Paul Smith, La Perle’s head coach and former Cirque du Soleil performer, gesturing to an almost-empty open box of mini chocolate bars on his desk backstage.
3 Take chances, says Young, who has worked all over the world, including most recently at Dragone’s show in China. “Every time we go out of our comfort zone, we learn a lot about ourselves,” she says.
Price, base / as tested From Dh173,775 (base model)
Engine 2.0-litre 4cyl turbo, AWD
Power 249hp at 5,500rpm
Torque 365Nm at 1,300-4,500rpm
Gearbox Nine-speed auto
Fuel economy, combined 7.9L/100km
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
The Land between Two Rivers: Writing in an Age of Refugees
Tom Sleigh, Graywolf Press
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Conservative MPs who have publicly revealed sending letters of no confidence
- Steve Baker
- Peter Bone
- Ben Bradley
- Andrew Bridgen
- Maria Caulfield
- Simon Clarke
- Philip Davies
- Nadine Dorries
- James Duddridge
- Mark Francois
- Chris Green
- Adam Holloway
- Andrea Jenkyns
- Anne-Marie Morris
- Sheryll Murray
- Jacob Rees-Mogg
- Laurence Robertson
- Lee Rowley
- Henry Smith
- Martin Vickers
- John Whittingdale
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The%20specs
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A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
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The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
COMPANY%20PROFILE
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Russia's Muslim Heartlands
Dominic Rubin, Oxford
Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
COMPANY%20PROFILE
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THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
