Société Tunisienne de Réassurance (Tunis Re) has promising prospects and is expected to improve its financial performance, indicates BMCE Capital Securities.
The stockbroking firm, in a report, says that this is in particular thanks to a strategic plan focused on maintaining an adequate level of capitalisation, profitability, digitalisation, skills development and the expansion of business in target markets.
Tunis Re has been engaged in a process of diversification of its activities for several years, positioning itself as a pioneer of retakaful in the Tunisian market.
Despite a difficult and changing economic context since 2011, the insurance sector has demonstrated strong resilience in the face of endogenous and exogenous shocks.
In terms of activity, the operator covers marine and non-marine branches and has a good knowledge of the risks characterising the Tunisian market.
Despite an already high market share at the local level (44%), Tunis Re still has significant growth potential in Tunisia due to low insurance penetration (2%), thus offering the reinsurer opportunities in this market.
Ambitious internationalisation strategy
Tunis Re would consider exploring new markets and establishing partnerships in regions with similarities both on the socio-economic and socio-cultural levels. In this regard, strengthening Tunis Re's equity capital seems to be a crucial step for its development.
International operations contribute 56% of the company's overall turnover, thus demonstrating the importance of the foreign market for Tunis Re and strengthening its positioning as a trusted and competitive reinsurer on the international reinsurance scene.
Diversification of the investment portfolio
The company has implemented a new investment policy to develop high value-added investment opportunities while maintaining the quality and liquidity of its assets. Consisting mainly of fixed-income investments and deposits with ceding companies, Tunis Re's portfolio would be strengthened by real estate investments for better risk management and increased profitability.
Digitalisation strategy
Aware of the importance of digitalising business processes, Tunis Re places digital transformation at the heart of its strategic axes. Thus, the operator has started a data management project to improve its commercial, operational, and risk management activities.
Tunis Re’s growth catalysts include:
• A growing demand for insurance/reinsurance protection, in an environment marked by increased volatility;
• A selective and prudent underwriting policy enabling a continuous improvement in its net loss ratio at the end of 2023 to 54.8% (compared to 53.7% in 2022) and its combined ratio to 92.7% (compared to 91.7% in 2012);
• A long-term investment strategy enabling the operator to cope with the volatility of the financial markets;
• Development of an ambitious 2023-2027 Development Plan;
• The company’s desire to venture into new international markets;
• A solid financial base resulting in a solvency margin of 173% at the end of 2023.
The risks for Tunis Re include:
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An increase in claims related to the recurrence of natural disasters;
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National and international economic situation affecting practically all branches of insurance;
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Fierce competition leading to strong downward pressure on prices;
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Increased risks related to inflation following geopolitical tensions and rising energy prices;
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Risks related to the exchange rate following the depreciation of the Tunisian dinar.
According to BCE Capital Securities, the outlook for Tunis Re in 2024 includes:
- An expected increase of +4% in overall turnover to TND259.9m;
- An expected improvement in the loss ratio to 54.5%. The combined ratio should, for its part, stand at 94.6% due to an expected increase of +2% in technical provisions to TND465m;
- An expected increase of +29% in net income to TND24m due to an expected improvement in claims and the continued increase in investment products.
Tunis Re financial results – Actual and Forecast
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Figures in TND m, unless otherwise indicated
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2023
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2024
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2025
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2026
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Actual
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Budget
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Plan
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Plan
|
|
Net results
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18.6
|
24.0
|
26.6
|
29.3
|
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RoE
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8.2%
|
10.2%
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10.6%
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11.0%
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Equity @ 31 Dec
|
246.5
|
259.6
|
276.7
|
295.6
|
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Turnover
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222.5
|
233.6
|
245.3
|
257.6
|
|
Net premiums
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162.9
|
171.0
|
179.6
|
188.6
|
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% retention
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73%
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70%
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70%
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70%
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Net claims
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84.6
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81.0
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83.6
|
86.9
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Loss ratio
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54.8%
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54.5%
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53.3%
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53.0%
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Net combined ratio
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92.7%
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94.6%
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93.6%
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92.9%
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Source: BMCE Capital Securities
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