Muscat Insurance Company SAOG (MCTI) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining today's investor call. We truly appreciate your time and continued support. During this call, we will provide a brief update on Muscat Insurance Company's recent performance, key developments and our strategic directions moving forward. In this room with us today, we have me [indiscernible] Chief Compliance Officer; Deputy Chief Executive Officer, Mr. Krishnan and Deputy Chief Finance Officer, Ms. Aleena Tony. To start, I'll briefly set the stage and then I'll hand it over to our Deputy Chief Executive Officer, Mr. Krishnan, for a broader overview and therefore, Ms. Aleena to take it over and run into brief with the financials. We look forward to an engaging and productive discussion, and we are happy to address questions, if any. With that, now I'll turn it over to Mr. Krishnan.

Good afternoon and thank you very much for joining. It's really a great pleasure to represent Muscat Insurance Company and meet you all today and present the performance of Muscat Insurance Company for 2024. I thank Aleena who's joined me as Deputy CFO and I wish to start talking in brief about the company's performance in 2024 and leave Aleena to take you through in detail about the financial performances and talk through of the activities that have happened in 2024, the plans ahead in terms of strategy going forward for MIC. So in brief, if I have to mention about the 2024 performance, it's been a good performance compared to previous year. There are a lot of activities that happened in 2024, starting from regrouping and having a strong team building, recruitment of capable, efficient persons, recognizing of people who deserve to be recognized, investing in systems, cost effectiveness improvements and all those things clubbed with clear focus on the area we wanted to improve business profitably. The financials, the revenue had increased in comparison to previous year, though marginally. It is [Audio Gap] sales in the motor portfolio because as I mentioned, our focus is to write business which will result in profit for the company. We have grown the general insurance business, which constitutes about 60% of the total portfolio mix. Strongly last year, in general, which also added to the bottom line. Motor, owing to various factors prevailing within this economy as well as the unpredictable nat cat situations which happen quite frequently in this geography and the inflation in fuel costs, coal cost, labor and paint costs. We are consciously downsizing the motor portfolio, and that has nearly improved our performance. We had a lot of underwriting guideline changes during the year 2024, actually it started in November 2023. So the bottom line here is the growth has been consciously focused on areas where we are able to perform work and where there could likely be a challenge beyond controls. We consciously are -- have been generating revenues, increasing the price, improving the claims effectiveness to achieve the results. Gross profit after tax has [Technical Difficulty] OMR 368,000 compared to negative OMR 469,000. This also sum up the performance of the company, the efforts that they have taken to reach this performance compared to same last year overall. And this has a significant element of support from the investment income as well. Going forward, 2025, we are -- as I said, we are further investing in the enhancement of systems, core systems, particularly in the portals, all the peripheral systems that are required to be in tune with the future. Improvement in the existing claims management practices where there's always scope for improvement. There is no finish line for success. So if there is some achievement rather than resting on the laurels, we wanted to sort of further improve the existing processes across the company, not just limited to claims and underwriting, ensure that the compliance regulations are maintained. Talking of compliance, I think there is a recent regulation to have the nat cat cover inbuilt as part of the motor third-party insurances. We are awaiting for the direction from the FSA, and this year, most likely at any point in time we may expect the insurance companies to support insuring the nat cat element of the motor third-party insurances. Branch streamlining is under process, we are ensuring there as well to grow businesses on the general side and be watchful on the motor until the regulator and the Oman Insurance Association is really supporting us in this regard. Once they come out of the study of the premium that has to be set in as a standard for all the companies, we will then look at how do regroup the current plan. New product development, we are embarking on working on a couple of new products, most probably the pre-underwritten products to make the process, system faster, speedier, efficient and delivering to the customers. We have sort of worked on sustainable marketing and communication strategy. We have recruited few key positions and recruited few people engaging for the customers to get their feedback and act proactively in developing the right products that are required. And last but not the least, we are very conscious of the profitable growth. And if that comes from general life, we are very keen. If it is a bit challenging in other lines, we will be watchful. With these few words, I hand over to Aleena, CFO. Thank you.

[Audio Gap]

I have some few questions. Regarding your investment strategy, could you provide some insights? Investment strategy as well as what do you expect the performance to be in the current year?

As a company, as a whole, we are looking for the long-term investments, normally like we have used to diversify investments in different portfolios. If you can see our portfolio itself, you have seen, it is not only concentrated on the fixed deposits or equities. We have diversified our portfolio. But our aim is to have actually to have a continued and stable income for the long term. So we always prefer considering the policyholders, we always prefer to have the low risk so that our investments will be secured and we can have a sustainable and stable income, which can be derived. So accordingly, if you can see our major portfolio is coming into fixed income securities, bonds and in the equities. So we used to diversify as well as we used to see the long-term strategy like -- it has to be stable and it has to be continued growth so that our investment will be secured for the policyholders.

Okay. Understood. So what is the target return on the investment portfolio that you're targeting? Also, do you have any plans to increase your equity allocation? And what is the current equity allocation also? Can you provide some examples of that?

Yes. The current equity [indiscernible] just go back to the investment mix slide. Can you see the screen, I am not sure, in the investment mix slide. So if you can see the investment mix actually it is 49% in the bank balances and fixed deposits. Especially if you are seeing the market rates, the rates has come down compared to previous year. Previous year, we had actually the good amount of investments, which we have placed for a little long-term at the higher rate, which is giving. If you are seeing the investment portfolio, you can -- I already explained, approximately OMR 250,000 has earned only from the fixed income. This has come mainly because we have blocked certain FDs at the higher rate, which benefited us during the current year. That is on one side. Second thing, parallelly we will be going into the -- it's always there is a low risk, low return, and it will be high risk, high return. So we always see that both the sides. We want -- one side, we want to save our policyholders' money. On the other side, we will look into the more investments, so we are diversifying into equities. So even if -- when we are comparing with the previous year, you can see our equity mix has increased compared to previous year from 12%, it has increased to 15%, so that we are trying to explore the market and wherever there are possibilities to have higher rate of returns, we used to invest there. And accordingly, we will try to generate income and profit. So that our books will be or our investment portfolio will be always safe.

Okay. Understood. And can you also provide what is the current claims ratio and the combined ratio? I'm sorry if it was already discussed earlier, but I had some audio issues. So can you please repeat again?

Okay. the loss ratio -- overall loss ratio has been -- has improved from 92% end of 2023 to 90% in 2024 across the company, I'm saying, 90%. And the general portfolio -- I don't have the split now, but general portfolio has been really good. As I said, that contributed significantly, which consists of 60% of the total portfolio mix. And that is why we have a strategy in medium and long-term to grow the general business. Motor has been pretty much challenging not only for MIC, but for the entire insurance industry, because the fact of matter lies that last price was increased in 2016 and '17. We all know the inflation factors impacting it, particularly for the COVID and the increase in the inflation -- claims and awards out of the courts. So that has an impact, both price impact as well as the cost impact will definitely be pressure for the insurance companies not just to Muscat Insurance, it's universally. That's why as insurance company, earlier I mentioned, we work with Oman Insurance Association and regulator who are really supportive in making a market-wise study to know what is the borrowing cost, what should be the minimum premium that has to be bought -- I mean charged, so that overheads plus this manage the combined ratio. In my opinion, I've been in the industry for 30 -- more than 30 years. Motor and medical per se, the loss ratio, even if it is around 80%, 90%, it is considered to be a good performance. So it will be challenging unless certain changes happen. And we are here to support the economy until the changes come, and as Aleena mentioned diversify the investment in such a manner without compromising the safety of the investments as well as growing on the portfolio where we are able to make sustainable profits for the company. Did I address your question?

Yes. So could you please touch upon the market share for different lines of business such as motor, health? Can you please provide some explanation on that?

I don't exactly have the market share percentage right at the moment. But I can say that the motor portfolio compared to 2023 was consciously shrunk by around 39%, 40% of what we have completed last year, which is, as I said, it's a conscious effort. When we make the necessary controls both in underwriting, pricing, the immediate reaction when it is price elastic, it tends to fall. And that is anticipated and prepared as well. So in terms of general business, as I said, out of our total portfolio, it accounts for 60%. Motor will be around 20%. So although the motor pricing claims impact are there, we are not heavily reliant on motor per se. And balance will be my life and medical. So the mix is heavier and the strategy plan is to grow those businesses where it will grow sustainably.

Okay. So what are the trends then did you see in the motor premium levels as compared to 2023?

Market trends versus our trends. Market trend, it still remains to be extremely competitive because once we increased the price, I think we have done about 6x improvements in motor portfolio starting from November 2023. When I say improvements, improvement could be brought in -- I mean, could be understood from the perspective of price increase or could be coverage changes or underwriting guideline changes, controls, all of those encompass the actions taken during the last 1 year. Now when we adapted to change in this, that's why we did -- I mentioned it, we had done it in 6 phases rather than doing all at once. We are conscious of the price elastic market and the impact, and we were consciously monitoring each time we do, study the impact, whether it is going to have a negative impact immediately or in the future -- in midterm, long term and consciously derive our decisions frequently because it's not that we do once and then wait for 1 year or 2 years to make corrections. That tells that we are conscious of monitoring the change that has happened and measuring the response. So these things are helping us. We have increased the minimum premium in third party. We have increased the comprehensive premium for certain schemes, which were not performing healthily. We have come out of a few schemes since they did not really made sense to us at our -- at their requisite premium and our quoted premium last. So it's a combination of several factors. In two lines, if I have to sum up, yes, our premiums were increased compared to last year. We do have challenges when, for example, a customer who has had no claims last year is having to face paying an increase in premium this year, it has to be looked at or it is being looked at on a case-to-case basis, giving weightage for the due factors. Sometimes we do agree to reduce the loading, sometimes we don't. So it depends on the factors which present itself at that point in time.

Okay. Understood. Also, what are the loss ratio targets do you set for different insurance products?

It goes for -- I think for -- we keep it separately for general, medical and life. As I said, for the loss ratio on medical and motor, anything around 90%, 95% itself is -- loss ratio itself is supposed to be a really good performance. For general, I'm just thinking it's around 60% loss ratio.

So thank you all for your time and attention today.

Any more questions?

Any more questions? So I believe that we don't have any more questions. So thank you all for your time and attention today. We greatly appreciate your participation and insightful discussion. Once again, thank you for your continued support, and we look forward and staying connected. Have a great day ahead. Thank you.

Thank you very much.

Thank you, everyone who joined.