Oman Qatar Insurance Company SAOG (OQIC) Earnings Call Transcript & Summary

So welcome to the first NSX discussion session for the year 2025. We will officially kick start the session now. The first item for today is the agenda, which is in front of you, starting with the list of Board of Directors, going to the management chart, highlighting the financial performance, moving to the investment and then the solvency position. And at the end, there's a chance for Q&A. In terms of Board of Directors, there's no change in the Board of Directors midyear or mid the discussion. Mr. Salem al-Mannai is the Chairman of the Board, deputed by Dr. Musallam Qatan and the respective others. In terms of the OC and the top management, again, there is no change what you have seen previously. Myself Hasan Al-Lawati, CEO of OQIC.'m joined by Ali Al Lawati, who is the Chief Business Officer. I've got Mohammed Jawad, who is CFO; as well as the Investment Relationship Officer and Board Secretary. And to my left is Omar Al Shanfari, Senior Manager of Government and HR Relationships. Digging into the financial performance, this is a highlight of IFRS 17 as well as IFRS 4. The first column on the left income. The column in the middle is about the technical performance and to the far right is the profitability. The first row is IFRS 17 and the second row is more or less IFRS 4, especially the first 2 elements. Let's go with the top line income, insurance revenue and GWP. GWP has seen -- it's been constant, OMR 49.1 million for the first 6 months of the year versus OMR 49.3 million last year. And -- but you will see that there is a drop in the Insurance revenue and there are 2 main reasons for that. The drop is from OMR 33.6 million last year to OMR 31.5 million. The first element is because of the earnings. The growth last year, we have seen mainly in Q1. But this year, we have seen a higher growth in premiums in Q2, and that's why it has impacted the earnings slightly. We will see that towards the end of the year. It will adjust by itself. Second element is the ECL, the expected credit loss. We have taken a sufficient ECL this year, not only on the premium side, but also on the claims, the unrecoverable claims mainly for the personal lines. There are many items with these small, small claims, hit-and-run claims, for example, or cases where we are unable to recover more than 4 years. So we have cleaned up completely our recoveries and ECL and that's the element of it as well. Now we move into the Insurance Service results and underwriting income. We'll start by the IFRS 4, which is the underwriting income. We have seen nearly 30%, 31% increase in underwriting income. OMR 2.2 million last year, and this for the 6 months of this year is OMR 2.9 million. However, if you compare this with the Insurance Service result, which, as you know, carries a different methodology and different way of calculation, there is a drop from OMR 700,000 to OMR 100,000. There are 3 main reasons for that. Reason number one is we have enhanced our reserving in -- overall for the company, but mainly, mainly in the Medical book. Our business is increasing. The portfolio is steady for the last 2 years. So we have seen huge drop in 2024. We've maintained almost the same level of premiums in 2025. And for that, it actually suggested that we take additional reserves. Plus there are many dynamics in the Medical business, lots of happening here. So we wanted to go again exactly as per the actuarial recommendation. The second element is the loss component element, which is very much related to -- or specific to IFRS 17. So for the balance unearned premium and mainly in the Medical space, and you can make that when you enhance your reserving when your performance is 2% or 3% higher than 100%. Then for the remaining unearned premium, you take credit loss. So we have taken -- sorry, loss component, we have taken that as well. The third element is we have changed the assumption of risk adjusting factor. So the new assumption is 30% -- nearly 30% higher. So we have taken that as well in the Insurance Services IFRS 17. But if you go to the standard way of doing business and go to the IFRS 4, the performance is far better than last year. Now we move to the profit after tax. The last element before the profit is the investment income. We have seen an improved performance of our Investment portfolio. Our Investment portfolio has grown overall, and you will see in the next slides. The income generated was positive for the first half of the year compared to last year, mainly because of the improvement in the equity market, plus our strategy -- a balanced strategy between the equity. Moving to the next slide. And of course, the profitability after tax is OMR 1.9 million versus OMR 1.1 million for the first half of this year and last year, respectively. Financial position, as far as our balance sheet is considered, there's no change in the total paid-up capital, nearly OMR 22 million. The net worth of the company has increased from OMR 36.5 million to OMR 39 million. Assets remained steady. Total investment, as I referred earlier, has increased from almost OMR 59 million to OMR 65 million. And then the number of employees also has increased versus last year and the humanization ratio remains above the legal threshold that the comp threshold of 75%. Some of the key ratios of our portfolio on the top left, gross premium mix. The portfolio seems fairly well balanced between the Retail, Medical, Commercial Lines, which we have split into Marine Aviation, Property and Engineering and then finally, the Liability lines of business. You might notice that under the Property, which is Property & Engineering, the ratio or the share has increased. This is mainly due to the I wouldn't say a drop in business in the Engineering business, but we had a couple of one-off projects last year, which we have not seen this year. The market has seen a bit slowness in new projects. So it's nothing but low projects or no much projects than what we have seen in the previous year. On the right side, the combined ratios, I must say that from 2022 until 2023, I think this is the IFRS 4 combined ratio is. And then from 2024 full year and half year and the first 6 months of 2025, this is based on IFRS 17. So it remains below 100%, but higher than last year. And I've shared the reasons for that as far as IFRS 17 is concerned. But as far as IFRS 4 is concerned, we have seen a better combined ratio than last year. So on the bottom left, the return on equity, again, there is a lot on the right of this slide. This is again all related to IFRS 17. And keep in mind that in 2024 and mainly 2023 and 2024 and 2025, the increase of share capital has kicked in, and therefore, the ratios will be lower. So 2022 was 19%. 2023 was the year of merger. 2024 and beyond is the year of integration and the share capital increased from OMR 10 million to OMR 21.9 million. NAV per share as you have been maintaining a steady growth year-on-year. So from 210 baisa in 2022 all the way up to 242 baisa for the first 6 months of the year and slightly higher than last year. I hand over now to our CFO to shed some light on the investment details.

Thank you, Mr. CEO. So when we talk about investment details in this slide, I'll be dividing the discussion into 2 points. The first point would be the composition of the investment portfolio. And second, we will talk about the income from the instruments we are holding. So to start with the composition of the portfolio, as stated by the CEO, the first half of 2025, we witnessed at OMR 64.5 million investment base compared to OMR 58.5 million in H1 2024. So if we go through the mix of portfolio -- Investment portfolio, we can see that in 2025 and 2024, our equities used to be OMR 14.2 million in 2024, which is now OMR 8.6 million, and that is due to the establishment of investment in [indiscernible] fund. When we go through the bonds, we see it used to be OMR 12.1 million, which is 20% of the portfolio. Now it is 30% of the portfolio amounting to OMR 19.4 million. In terms of fixed income -- fixed deposits, money market fund, it used to be 55% of our portfolio amounting to OMR 32.2 million. Now it increased to OMR 36.6 million, but the percentage somehow is almost similar 56%. So again, if we see that Investment portfolio is balanced, it is towards guaranteed yield, which can protect policyholders fund and generate sustainable investment income. Moving to the Investment Income composition. In the first half of 2025, we recorded OMR 2.3 million investment income compared to OMR 1.3 billion in 2024. So the portfolio yielded in 2025 first half almost 7.2% compared to 4.55% in 2024 H1. Mainly we can see that there is a huge shift in our equities. In 2024, first half, we used to book -- we booked 42% loss in our equities, which now changed to almost OMR 0.5 million gain, which contributed 20% to our Investment Income in H1 2025. Our yield from bonds also increased and fixed income, and this is due to the increase in the portfolio size. Now moving to the solvency position. Historically, we can see that OQIC is having always a solvency surplus over the required capital using RBC method or the previous method used by us. So in 2024, the minimum RBC was OMR 10 billion. But when we check the liabilities of OQIC, the minimum required RBC was amounting to OMR 17 billion. Calculating the RBC and the audited RBC in 2024, we witnessed a surplus of OMR 29 million over the minimum required RBC calculation. So this solvency is representing a strong financial performance of the company and strong balance sheet, which can sustain the company position in the market and protect policy [indiscernible]. With this, we have reached to the conclusion of our presentation, and we are opening the floor for any questions.

Are there any questions?

My name is Sanjay Shetty. I'm from Mar Capital. So my first question is regarding your Insurance revenue. Like you mentioned that you have seen a decline in your Insurance revenue. So it's about 6.3% year-on-year in 1H '25. And looking at the financial statement, this seems to be a weakness in the Property & Casualty segment, right? So -- but even in property & Casualty segment, but your other 2 segments like Marine, Energy and Medical and Life reported growth. And at the same time, we noticed that the net insurance finance results improved for Property & Casualty, but it softened for the other 2 segments. Could you help me understand like what are the underlying drivers for this divergence? -- like revenue decline for Property & Casualty, but the Insurance results improved. Insurance Service results improved for that particular segment? And it was the other way around for Marine & Medical and Life.

Thank you, Sandesh. First of all, that the Property & Casualty is a weakness -- has seen a weakness. So it's not a weakness. The drop in business does not mean that there's any weakness in the approach. I told you that it's mainly in the Engineering. So Property per se has not seen any increase -- any decrease in business. It's fairly stable versus last year. The drop is mainly in the Engineering lines of business. We had one-offs. There was a particular account that went into multiple extensions last year, and that itself is a big amount. So we have seen -- we have won new projects this year as well, but these are mainly small to medium-sized projects, and we have not seen major programs in online. As far as we are concerned and as far as our understanding of the market, OQIC is one of -- if not the leader, one of the leading insurance companies in the space of engineering. And rightfully said, we have seen positive underwriting income as well as the net operating income from these lines of business, thanks to our underwriting discipline. There are many other businesses available for us to seek and pursue is Property, Engineering as well. But it does not fit within our philosophy at the rates that being underwritten now. So we're very careful though this is our appetite, but we're very careful. If it comes our way through our technical pricing, then we go very aggressive to win that account and put all our efforts. But if it is far below our risk appetite, then we respectfully let it go. Another item to note here, Sandesh, is that we only deal and we only work with A-rated reinsurance companies. That has been our philosophy. That's how we've structured our risk as well. So there are cases where the account or the risk falls into the Category 3 and beyond where we don't seek other alternative options. We stick to the markets that we deal with internationally. Now moving to the element of -- you said Life and Medical. Am I correct, Sandesh, Life and Medical?

Yes, yes, Life and Medical.

Yes. We have seen good growth in the Life sector and our performance is positive. So there's a positive growth in underwriting income and there's a positive net operating income in our Life business. So that remains our focus, and we are growing it again in a steady manner, not just opening up the portfolio. The nature of Life business is also tricky. You might enjoy 1 or 2 years with profits and then you might end up hitting hits here and there. So we realized, we understood we have done enough actuarial studies on that. So it is a line that we want to further grow. In terms of Medical. Medical, there is no growth in top line. In fact, the first quarter, we have seen nearly OMR 10 million, if I share accurate information, OMR 10 million drop in Medical business, but this will recover in Q2 with a different strategy. Earlier, we used to focus on -- we were just -- we had a focus on across the accounts, across these different services programs, but now we focus on a certain segment versus winning 1 or 2 massive accounts and then take the hit there. So in fact, what we have done, we have done a lot of cleaning in our Medical business. We have let go loss-making account, which has impacted the top line. And of course, when you let go an account, you still live with the consequences and the impact of these accounts. Still you will receive bills 3 or 4 months post the expiry of the policy, you will still get these bills from the hospitals. Your reimbursement goes on. And of course, when you do your actuarial studies and when you study the past performance, you also take these accounts into account. So the impact of these loss-making accounts might stay with us for a year until it completely goes away from the portfolio. But overall, the accounts that we have fixed and we have won this year has a historic better performance than what we used to have in 2024. Our renewal approach has also been strengthened further. We put a lot of analysis. We have invested a lot in technology and into AI. So we know we have a better clarity on what we're expecting. However, the dynamics of Medical, as you know, is very different. Medical, there is a lot of inflation going on in the Medical space. It's very price sensitive. So if you go beyond certain level of pricing, then the end result would be not winning any account. If you're not winning any account, then you have to live with your expenses that you have invested heavily in. OQIC is one of the leaders in the Medical space. We have invested quite heavily in the infrastructure of Medical. And that's why we need to find the right balance between not losing our market share versus acquiring profitability. So I expect that moving forward, once there's enough clarity and stability in the medical business, we expect to see some enhanced performance, but it remains our strategic line of business. Yes. we are having our own in-house TB or Claims Management System. This is for the last 3, 4 years. So we keep investing in that. Any further questions? There's a question from [indiscernible] Net profit from Insurance result fell to just OMR 56,000 in H1 compared to OMR 693,000 in H1 2024. What are the main reasons for this sharp drop? [indiscernible] this is your first question. And I think I answered this question. There are 3 elements why we have seen the net service result of Insurance Service dropping in this year. One is the, we have taken additional reserves for our portfolio and mainly vast majority because of the Health Insurance and as recommended by our actuaries. So we went this time completely going ahead as per the actuarial recommendation without the need for waiting until the end of the year. So we're doing an actuarial review on a monthly basis. And that's why we want to avoid any surprises by the end of the year. It's only a prudent approach that we are taking. Second is the loss component. If the portfolio is making losses, then as per the IFRS 17, you have to take a loss component on that. And Medical is a loss-making. And I think our combined ratio is roughly 103%. 3% of unearned premium is quite big because we have a lot of earnings that must -- will take place throughout the year. And the impact of that was quite severe. Third element was because of risk adjusting factor this time, our Board as well as our internal actuaries in discussion with the group, we have changed our assumption and we have taken a higher risk adjustment factor and this increase is nearly 30%. All of that put together has given us a lower insurance service IFRS 17. However, in terms of the apple-to-apple performance, apple-to-apple comparison in our technical performance, you might refer to our underwriting income, which we have seen a 30% increase. I hope I've answered your first question again. The second question with revenue and reinsurance pressure. what are OQIC's main growth strategies for H2 2025 and beyond? So we are not changing or diverting from our strategy that we have agreed on over the last 2 years. We want to have quite a balanced portfolio in terms of acquiring the business. You will see that in Motor and Retail, we are not among the leading companies in this line of business for us. It's a very important line of business. We want to be the leader. And I think we are in terms of offering our services to customers, whether at the issuance -- policy issuance level or at the claim level. Medical and Life remains our focus area. We're looking at the long-term strategy. And you can -- in Insurance, you can't build strategies across 1 year. So what we see for the future, Medical and Life plays a vital role there. And of course, we would like to be -- we will continue being among the top insurance companies and leaders in the commercial asset business. The balance all depends on the dynamics of the market and what are the available opportunities. Good question. The first question is good. You're talking about the recoveries from the reinsurance market. This is one of the reasons why we only deal with A-rated securities, A-rated markets. For us, the risk element, the sustainability becomes very important. Our partnership with these reinsurance companies, which they have reputation and they honor their dues becomes quite vital. So -- and that's why we don't work with unrated or less than A-rated. Of course, there are a few exceptions and these exceptions is only for the Omani market. So we would like to partner up with the Omani insurance companies. Omani insurance companies listed in the Omani market to promote coinsurance and to promote a market additional growth. But when it comes to pure reinsurance, we adopt a very stringent and very strict philosophy. Does that answer your question? In case there are no further questions, thank you very much for listening to our session today and for participating. We will meet up in the next session. And with that, we officially announced the end of this presentation. Thank you all.