International actuarial consulting firm Badri Management Consultancy says that it sees growth in the profitability of the Saudi Arabian insurance market.
However, the consultancy also cautions that prospects are bleak as currently the industry is again sliding into a price war on both the Motor and Medical insurance fronts.
In its report, titled “KSA Listed Insurance Industry Performance Analysis – H1 2024”, released yesterday, Badri said, “If this trend is not arrested quickly, we project the full-year profitability of the industry to be significantly lower than last year.”
On a promising note, the report added, “The silver lining has been P&S (protection and savings) where we finally see some growth, and this is one line that results in long-term profitability for the companies.”
P&S GWP jumped by 203% from SAR940m ($250m) in 1H2023 to SAR2,844m in 1H2024.
As for other lines of business, Motor GWP was lower by 3% year on year in 1H2024, while Medical GWP increased by 10%.
Badri said, “The dip in Motor is concerning as we see the premium rates peak in 3Q2023 and have been on a downward trajectory since then. This downward spiral is continuing as we again see companies fight for the topline by reducing rates.”
While Medical showed a 10% topline growth, the rise in insurance service expenses for Medical is higher causing a 33% dip in net service results in this branch. “For Medical, there appears to be a lot of price competition and without a price correction, expectations for the next two quarters are grim,” the report said.
Overall, total gross written premiums in the Saudi market showed a significant 13% growth, climbing from SAR34bn in 1H2023 to SAR38bn in 1H2024. Total insurance revenue grew by 18%, increasing to SAR32bn in 1H2024 from SAR27bn in the corresponding period of 2023.
Profitability
Overall underwriting performance improved slightly, with insurance service results rising to SAR1.95bn in 1H2024 from SAR1.85bn in 1H2023, an increase of 3%. However, 14 companies showed a sharp decline in insurance service results compared to the previous year. Investment income grew by 29%, from SAR1.2bn in 1H2023 to SAR1.6bn in 1H2024, often offsetting weaker underwriting results.
Looking at the overall results, the KSA insurance industry’s profitability (after zakat & tax) rose by 26% in the first half of 2024, climbing from SAR1.7bn in 1H2023 to SAR2.2bn in 1H2024. However, the performance was mixed. The Top Three companies — Tawuniya, BUPA, and Al Rajhi — saw profit increases of 105%, 36%, and 47%, respectively totalling SAR1.6bn. 14 companies reported a decline in profit averaging -48%, totaling SAR261m.
Apart from some notable increases in profit for Wataniya, Arabian Shield, and ACIG, there are some worrying signs for many others with sharp falls in profit. Excluding the Top Three, the industry reported a profit of SAR533m, down from SAR693m in 1H2023, a 23% decrease.
Badri says that this likely reflects the impact of increased price competition, particularly in the Motor TPL and Medical SME segments.
To download the complete report please click on this link.