QIC reports premium growth of 16% to USD 2.46 billion for the first nine months of 2017 – International Press release
Impact of major natural disasters in the third quarter limited to earnings
Qatar Insurance Company (QIC), the leading insurer in Qatar and the Middle East North African (MENA) region, recorded a growth of 16% in gross written premiums (GWP) to USD 2.46 billion in the first nine months ended 30 September 2017.
2017 is set to be one of the costliest years on record for global insured natural catastrophe losses. In addition, (re)insurers were hit by adverse legal changes (the Ogden rate adjustment) in the UK during the first quarter, a continued soft global underwriting environment and politically driven financial markets. Against this backdrop, QIC Group has achieved a net profit of USD 84 million for the first nine months of 2017, compared with USD 195 million for the same period of the previous year.
Mr. Khalifa Abdulla Turki Al Subaey, Group President & CEO of QIC Group commented: “The financial results for the first nine months of 2017 demonstrate QIC Group’s resilience under conditions of severe market stress. In view of our significant global footprint and exposure as well as the ongoing diplomatic and economic concerns in the Gulf region, our financial performance is robust. The Group’s well-diversified franchise has proven able to tackle the challenges of the marketplace. The adverse impact of these events will be limited to our earnings, with QIC Group’s strong capital position remaining unscathed.”
Mr. Al Subaey continued: “In the wake of the third quarter’s natural disasters, our well-capitalised international operations are poised to benefit from the expected upward market revision in (re)insurance premium rates. Meanwhile, we conduct ‘business as usual’ in our Qatari home market and in other Middle Eastern countries, despite the geopolitical and macroeconomic challenges in the region.”
Income statement highlights for the nine months ended 30 September 2017
|Figures, in USD million||9M 2017||9M 2016|
|Gross written premiums||2,464||2,124|
|Net written premiums||1,995||1,827|
|Net underwriting result||(28)||151|
|Net investment income||219||174|
|Non-life combined ratio||108.2%||98.9%|
Other key financial indicators
|Figures, in USD million||9M 2017||Q4 2016|
International operations continue to be engines of Group premium growth
For the nine months ended 30 September 2017, QIC Group’s GWP grew by 16% to USD 2.46 billion compared to USD 2.12 billion for the same period of the previous year.
QIC Group continues to expand steadily and systematically across its global and regional target markets, lines of business and client segments. The company’s international operations, namely its Bermuda-domiciled reinsurance subsidiary Qatar Re, specialty insurer Antares headquartered in London and Malta-based subsidiary QIC Europe Limited (QEL) were once more the growth engines of QIC Group. During the first nine months of 2017, their combined GWP grew by 25%, lifting their share of the Group’s combined premium income to 73%, up from 70% a year ago.
Domestically, Q Life and Medical Insurance Company (QLM), the dominant life and medical insurance company in Qatar, continued to drive premium growth, benefiting from its innovative healthcare cover solutions and unrivalled customer service.
QIC continues to maintain its dominant leadership position in its home market Qatar. As a result of its international growth strategy, over the past ten years, QIC’s premium volumes have grown six-fold, set to exceed USD 3 billion for the full year 2017, positioning the company as the largest insurance and reinsurance group in the Middle East region.
The Group’s premium income and profits from the Middle East region (ex-Qatar), however, are not material to the Group’s revenues and earnings.
Net underwriting result reflects impact of massive insured natural catastrophes in the Americas
QIC Group’s net underwriting result came in at a loss of USD 28 million for the first nine months of 2017 (versus an underwriting income of USD 151 million in the same period of the previous year). The Group’s non-life combined ratio stood at 108.2% against 98.9% in the previous year.
Like the entire global (re)insurance industry, QIC has been impacted by hurricanes Harvey, Irma and Maria (HIM) in the third quarter of 2017. According to Morgan Stanley, insured market losses could exceed USD 100 billion, making the quarter the costliest ever for insurers and reinsurers. Through Qatar Re and Antares’ Lloyd’s syndicate 1274, QIC has had a sizeable exposure to these events, which resulted in net losses of about USD 174 million. In total, these three disasters added 10 percentage points to QIC Group’s combined ratio and eroded 6.5% of the Group’s total equity. QIC’s normalized net underwriting result, which excludes the impact of HIM, was USD 146 million for the first nine months of 2017.With the expected upward market revision in (re)insurance premium rates, the well-capitalised international operations of QIC Group are poised to benefit with an opportunity for profitable growth.
These losses are well within QIC’s risk appetite and the expected range for the respective exposures. Their combined impact did not affect QIC Group’s solvency from a regulatory, ratings or internal capital adequacy point of view. For QIC Group, HIM is an earnings event only.
As at 30 September 2017, QIC Group’s shareholders’ equity stood at USD 2.245 billion, compared with USD 2.326 billion as at 31 December 2016. In Q1 2017, the Group, via Qatar Re, successfully issued Tier 2 capital totalling USD 450 million. The issue was 14 times oversubscribed.
QIC’s relative resilience to HIM testifies to the Group’s effective risk and exposure management practices, prudent risk selection and state-of-the art internal controls.
QIC, like its industry peers, believes that there is still material uncertainty associated with the company’s loss estimates given the nature, magnitude and recency of these loss events. The estimate is based on a preliminary analysis of the company’s exposures, the current assumption of total insured industry losses and preliminary information received from certain cedants to date.
The nine months performance was also materially and adversely affected by the UK Government’s decision to drastically cut the Ogden discount rate, which shook up the UK motor insurance market, with an expected industry-wide reserving hit of over USD 10 billion. As previously stated, QIC Group has a major underwriting footprint in the UK and decided to strengthen its motor reserves by USD 31 million. Further changes to the Ogden rate are under discussion in the UK and could lead to favourable reserve adjustments with a positive bottom-line impact.
Resilient investment performance amidst regional turbulence
Since 5 June when the regional diplomatic standoff began, Qatar’s key stock market index has shed about 18% of its value. Despite these political and other unrelated economic turbulences in the Middle East, QIC Group generated net investment income of USD 219 million in the first nine months of 2017 (as compared to USD 174 million in the same period of 2016). The annualised return on investment amounted to 5.3% for the first nine months, significantly in excess of the global industry average.
QIC Group’s investment portfolio is globally diversified, across geographies, industries and asset classes. The investment exposure to the countries involved in the rift with Qatar is minimal. Moreover, Qatari assets represent only 23% of the Group’s total investment portfolio (excluding cash). Over 60% of domestic assets are Qatari bonds, most of which are USD denominated and Euro clearable, and hence highly liquid and tradeable.
Most regional and international observers do not expect any material adverse impact of the diplomatic standoff on Qatar’s economic growth performance, even under a prolonged scenario.
Further progress in cost efficiency
QIC has a long and proven record of cost efficiency and consciousness. During the reporting period, the implementation of additional effective cost control policies, in combination with an accelerated pace of work process automation resulted in a sizeable improvement in the administration expense ratio to 6.6% against 8.5% during the same period in 2016.