Doha Insurance Group Q.P.S.C. (DOHI) Earnings Call Transcript & Summary

Hello, and welcome to the Doha Insurance Conference Call. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Roy Thomas to begin the conference. Roy, over to you.

Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Doha Insurance Group's Third Quarter 2022 Financial Results Conference Call. On this call from Doha Insurance Group, we have Ghaith Jardaneh, the Chief Financial Officer; and Osama Rayyan, the Chief Investment Officer. We will conduct this conference call with management first reviewing the company's results followed by a Q&A. I will turn the call now over to Ghaith. Go ahead, Ghaith.

Good afternoon, everybody. Welcome to Doha Insurance Group's conference call to discuss the results of the company as of Q3 2022. The results have been very good for the first 9 months of the year 2022. Premiums have -- gross written premiums have reached QAR 1.2 billion compared to QAR 850 million in the same period last year. This represents growth of 45%. The growth has been bolstered by specific policies from the engineering line of business, which helped the company break the QAR 1 billion barrier earlier than it did last year. As you can see, earned premiums have only risen by 9% from QAR 307 million in the first 9 months of 2021 to QAR 333 million in the first 9 months of 2022. This is because a lot of the growth that we had in gross written premium came from insurance policies that are heavily reinsured. If we look also at segmentation into our gross written premiums, you will see that we have been -- that fire and general accident currently constitute 68% of our entire portfolio compared to only 63% last year. This was at the expense of a decline in the proportion of motor from 19% to 14%. Of course, we are happy with this development as we are trying to diversify our insurance portfolio, and we're trying to increase the weight of lines of businesses other than the motor line of business. Part of the great results that the company was able to achieve in this period was the major drop in loss ratio incurred during 2022. So last year's loss ratio reached 63%. This year, the loss ratio incurred has been only 50%. It was improved by the very good loss ratios experienced in MenaRe, Dubai. And we should note here that we don't expect this to be a recurring thing. We expect that the loss ratio at MenaRe will gradually fall in line into the normalized loss ratio for such business. Net commission cost is still at 1% of gross written premiums both in last year and this year and is in line with where it's supposed to be. And as we have discussed before, the underwriting results have improved substantially in 2022, reaching QAR 155 -- or QAR 156 million compared to QAR 103 million last year. This represents growth of 52% and represents operating profit margin -- or technical profit margin of 12.6% compared to 12.1% in the previous year. As for operating results, the operating results have increased from QAR 71 million to QAR 82 million. This, of course, is driven by the growth and the expansion in operations that the company is currently undergoing. As expense ratio and relative to gross written premiums, you can see that the expenses have declined from 8.4% last year to 6.6% this year. Investment assets have reduced from QAR 1.44 billion last year to QAR 1.4 billion this year. This drop is mainly due to a decline in the value of some of the investments that we have, which is relatively speaking commensurate to the drop experienced across the global markets. Our return has also declined from 5.6% to 3.3%. This is due mainly to losses incurred and the change in the fair value of many of the investments that we carry and according to the -- and which are measured according to their market values. However, we did have several income streams from investments that have actually improved. We have had an increase in interest income and substantial also increase in dividend income of about 55%. We -- however, these were not -- these improvements were not enough to offset the decline that has happened in the fair value of many of these investments. As for the combined ratio at the company, the loss ratio -- the much improved loss ratio has also driven down our combined ratio from 90% last year to 78% this year. Net income has improved from QAR 54.8 million in the first 9 months of 2021 to QAR 88.2 million in the first 9 months of 2022. And the company has achieved a return of equity of 9.9%. Of course, this is annualized compared to 6.4% for the same period of last year. The company's assets grew -- reached 3.3 -- almost QAR 3.4 billion compared to only QAR 3 billion in 2021. There was a slight improvement in shareholders' equity. This was, of course, reduced by the payment of dividend of QAR 60 million during the year. And it was also reduced. It could have been higher level. However, there were some losses incurred and the other comprehensive income -- investments held by the company. On the balance sheet strength and the solvency position of the company. As you can see, currently, the interest expense incurred by the company is relatively meager compared to the size of the company and compared to the profitability of the company with interest coverage ratio reaching 51x the interest rate expense. Furthermore, the company sits at -- on investments of QAR 1.4 billion, which are almost 3x the size of its net insurance provisions. This illustrates how strong the company's capital rate is and how highly capitalized the sales. Additionally, the solvency ratio at the company is quite high, stands currently at 269%, which is -- which far exceeds the level required by the TCV of 150%. Of course, the company, due to the increase in activity, has now had more accounts receivable on its books than it did at the end of last year. However, if we consider it as a days to receivable ratio, you can see that this ratio has declined from 128 days to 103 days. We hope that provided some brief of the situation at DIG, and we turn it over to you for any questions you might have for us.

[Operator Instructions] Our first question comes from the line of Zohaib Pervez from Al Rayan Investment.

Could you give us some idea of where do you see the industry as a whole moving -- going forward?

Right now, there's a lot of focus on probably major business coming from the expansion of gas deals and current projects that are currently being developed by QatarEnergy and its partners on this front. So we see energy as playing a big role of -- in the coming mid-term, maybe coming 3 to 5 years. Furthermore, we see a lot of -- there could be a lot of opportunities on the national medical insurance front. Once it is determined by -- or once all aspects of this potential scheme are finalized and introduced to market. There's also a lot of -- there could be a lot of opportunities on the development of the tourism industry in the country with a lot of maybe inbound travel opportunities. A lot of things related to all kinds of aspects of inbound travel activity coming into the country could also present many opportunities for the insurance industry. And also, the country now turns -- may be becoming more of a service-oriented economy. There's going to be a lot of public liability opportunities. There's still going to be opportunities with the expanding number of vehicles. And as the company -- as the country might grow and as the service industry might grow, we see a lot of opportunities for regular day-to-day insurance opportunities.

The mandatory insurance, you said, is one of the opportunities. I understand it should have been implemented by now. What seems to be the delay? And when do you think would be the time line for this?

It's probably -- it's really a government issue. We're not sure. Probably there are maybe more pressing priorities with the government, which ended up deciding to delay the introduction of the scheme. But we would expect it would come in -- maybe sometime in 2023. However, we don't have any concrete -- we were not in front of any specific date in which it will be introduced.

Our next question comes from the line of Lee Beswick from QNB.

Apologies, I joined the call late. So apologies if this has already been asked. And also, congratulations on the results. The results, as they have been for quite a while, have been very good. This is certainly one of the best-managed companies in Doha, in my opinion. Just on the acquisition, can you give us any indication of price? Because it's a very, very, very important thing, and it's probably the thing that determines whether your share price is worth -- 1.5 or 2.5 is the price at which you're going to do the acquisition. It's extremely unusual, and this happens a lot in Qatar, to announce an acquisition before you've announced the price. You should announce the price exactly at the same time as the acquisition because an acquisition can be very good if it's done at a low price or good valuation, and it can be a dreadful acquisition if it's done at a high price and high valuation. So can you give us some indication there on where this is going? And if you can't, can you commit to doing it in a very, very, very short term? Because it is absolutely 100% important for your share price going forward at what price you do this acquisition.