Oman United Insurance Company SAOG (OUIC) Earnings Call Transcript & Summary

Hello. Good afternoon, everybody. Welcome for this investor presentation of Oman United Insurance Company. And we are here to answer your questions. If you have any queries or anything about the company, please feel free to ask us. We are leaving the floor to Mr. Siva Kumar, who is the Deputy CEO, to walk you through the financial results, which was published with the MSX website.

Good afternoon, everyone. Thank you for attending the brief presentation briefing for investors. We thank [indiscernible] as well as everyone attending the program. We can take the questions maybe at the end. I'll quickly take you through the presentation update for the period up to 30th June, and then we take the questions, please. So as stated earlier, for those who are joining afresh, the mission and vision of the company is to always go for stable business, so that we are able to continue with sustainable and uninterrupted cash revenues to the shareholders. We have been always focused on quality of business and our focus on customers' experience from our claims and the service delivery have been our prime forte as well as the Oman United is concerned. So during the last year, we did have 2 awards: The Top Insurance Brand in Oman and the Exemplary Customer Service and Claim Settlement Award. Our teams have been delivering considering the challenges in the market. And we've restructured our teams in the last 1 year, 1.5 years to make sure that we are able to deliver on the expectations. So we have [indiscernible] from the initiatives, which we are poised to earn credit for the next 1 year, 1.5 years. So [indiscernible] 2.47 company with an 1985 established year with a OMR 10 million capital. Our present -- we complete requirements of the regulators, meanwhile on the continuous reserve of an additional OMR 10 million, legal reserve of 1/3 of the paid-up capital, which is OMR 3.33 million. And we also have a reasonable retail earnings as far as our finances are concerned. Our Board of Directors. During the year, sadly, we have our late Chairman who was there for 40-years-plus with the company, he passed way. And we had Mr. Saud Nahari, who was our Deputy Chairman earlier, he took over as the Chairman. And Sayyid Khalid Bin Busaidi, he was our Deputy Chairman, he was also part of the Board earlier. And as a new Board induction, we have Mr. P.R. Ramakrishnan who got inducted in the Board of Directors' meeting effective to 2025. So all the Board is being there practically fairly long 6 years to almost 25-years-plus. Mr. Ramakrishnan is the new addition primarily to [indiscernible]. Just as an update on the senior management team. More or less stable management team. They've all been there for more than 10 years, no fresh inductions, except a few where we have put some structure in to make sure we are focused on the branches and agencies growth, and we had [ Vishal ] [indiscernible], who joined us as the General Manager, who was earlier in our Claims Department. Other than that, all the senior executive team is stable, and they have been there with the company for long. As regards the dividend history. We have paid about OMR 15 million since the beginning of the inception of the company. And you would observe that we have been a consistent dividend payer over the last so many years. So this continues except that correction can be made on that to be disbursed. This was actually disbursed in April, the 2025 dividend of OMR 2.5 million. This was disbursed in April. Coming to our distribution channels. I think we have proud to report that our focused effort of continuing the relationships with the brokers, the marketing agents, [indiscernible] agents in branches, we have done branches and that have been consistent. And we have been stable in our business. We have seen some growth, but there are certain challenges which are there in the market, which we have envisage of. As far as our reinsurance partners, they continue to be [indiscernible] on the medical side. On the life side, we have had [indiscernible]. So all these reinsurance have been giving exemplary support and we have made some more strides in the last 6 months to make sure that we are able to address the challenges of the market as well as deliver what we would like to deliver to the market. Going into the financials. Broadly on the insurance revenue. These are all numbers based on the IFRS 17. We have our insurance revenue of OMR 16.16 million against OMR 17.4 million, primarily driven an increase in the UPR, which was evidenced for the period of [indiscernible]. Hopefully, this will grow as we have the mature policies coming in up to 31st of December. On the insurance services side, against OMR 650,000 negative last year, we are at OMR 488,000, but slowly, the trend specifically on the motor are showing improvement based on whatever corrections or decisions we took. On the investment income, against the OMR 1.8 million last year, we ended with OMR 2.5 million as on 30th June. And plain profit for the year is OMR 991,000, against OMR 266,000 last year. So this has to be seen with the backdrop that last year, we had the automobile garage operations getting closed. So some exchanges, incomes and finalization of balances for that, which current this year will not be there. Overall, from a balance sheet size perspective. Assets are OMR 96.5 million, OMR 10 million paid-up capital with a shareholders' equity of OMR 25.5 million and including the paid-up capital. And total investments are in the range of OMR 57.5 million with 62% of the investments still continuing in deposits, but we have expanded the equity book in the last 6 months. And this is evidenced by the change in the ratios overall. But yes, probably our target is to be in the range of OMR 59 million to OMR 60 million at the end of the year, total investments. And the solvency surplus as on 31st December. As per the regulatory norms, we were at OMR 14.43 million against OMR 11.14 million, it was a statutory requirement. So we are reasonably well placed as far as the solvency surplus is concerned. On the contingency reserve. As I stated earlier, we already have a contingency reserve of OMR 10 million. So overall, the balance sheet size is fairly comforting and financials are strong. So if you see this -- our share in [indiscernible] more or less stable. Retained earnings for the current year ended 30th June is at OMR 2.7 million against the OMR 3 million of last year. So we are hopeful that this will be fairly going in the right direction basically end of the year. The overall capital reserves is OMR 25.4 million against OMR 26.1 million of last year. On the investment side. As I stated, OMR 19 million is the equity investments against a OMR 16.9 million last year. So you can see the change in the portfolio composition. So overall, fixed income plus equity will be more or less together on the same proportion. But yes, this is our focus area for the current year, and we hope to be doing more on this part as far as more equity investment is concerned, but we are learning current regulatory requirements also. Two assets of our companies, these are at -- shown at -- continue to be shown at book value. We have not revalued them for long. And balance sheet size is strong enough, and we don't see any change in the accounting policy. So our head office property in [indiscernible]. It's a 9-storey building and there is [indiscernible] of about OMR 2.1 million on this property. The garage property is also fairly big one, which we have given it out on lease with an annual income of OMR 180,000 effective 1st of January. So this also has an unrealized OMR 2.15 million sitting in the balance sheet. So because of these 2 assets for the company, we have unrecognized depreciations of OMR 3.89 million exists. As regards team. I think going back to my previous presentation which was done, you'll observe that we have an 87% of Omanization percentage. We can take pride that we have invested in the local talent, and this is [indiscernible] quite a few of them are taking the various courses, either with the regulator or with independent agencies or pursuing the CII and other professional qualifications. So we take pride and we feel that we are proceeding towards our goal. And we have a target of proceeding [indiscernible] doing some qualifications by the end of the year, and we are on course as far as that is concerned. So we have field manpower and it is going for benefit of the company in the long run. As regards to the reserving methodologies. I think this is important to take note that our reserving philosophy is conservative as far as [indiscernible] is concerned. And we have the stable as far as our IBNR reserving and reserves are concerned. And our actuaries who have been there with us for the last 10 years, they have also been certified and we're looking forward to seen by our external auditors actuaries also, and there are no challenges as far as the valuations are concerned on the liabilities. So I think what are the challenges ahead? I think there is -- it continues to be the extreme competition in the market, number of players. And we are facing in the situation for long, and we hope this improves. So we are taking certain measures. But again, we are sitting in a market which is pretty competitive. And we are in a catastrophic zone where there are challenges in the underwriting and the risk in assets. As far as the medical business is concerned. We have done some -- we have applied for our license. We are awaiting the regulator's views. So we are hoping that in the next 6 months, we'll probably move ahead on the medical business more. We have grown the business. But again, our focus is on bottom line. And therefore, we will have certain challenges to grow this medical business, as our view. And we will -- we also see that there are challenges as far as the market is concerned on the collection of premiums. So with that, we have to be matching the risk and return kind of reward. And we will be a little conservative, but we have gone slightly aggressive into the areas where we are comfortable taking more risk. On the future outlook, we are working on increasing the digital market presence. I think we have stated that we will complete the 5 products on the retail side, on the digital side. This requires examination by the regulators. And hopefully, we are hoping that we will do this for 5 products in the first week of September. And if everything goes well, slowly, we will expand the digital marketing space. On the equity investments, as I stated earlier, our focus will be to grow the equity book considering the changes in the market. And we have seen some change in the proportion between the fixed income -- fixed deposits versus the equities. On the nonmotor business growth. We have [indiscernible] the motor business. They're going through [indiscernible] slightly faster results. We hope to see continued effort as far as this is concerned. But again, this is in the back off of what the competition is in the market. As far as mandatory health. We have to wait for the -- we're waiting for the regulator's opinions and then hopefully it will be [indiscernible] if it is positive, then we will be able to grow the book. Thank you. The floor is open for questions, please.

Any questions, please?

Yes. My first question is on your investment income for -- your investment income for 1H saw approx 36% year-on-year growth. Like could you like give me some like why is it increasing and is it sustainable going forward? Like what has happened in the investment income?

See, with respect to this investment income, we have received some good dividend income that is one of the main reasons, plus the market also went up, so since we are into equity, we had some recent appreciation compared to last year. So both cash dividend income plus appreciation has yielded these numbers. And going by if you ask sustainability in the future, yes, definitely, for third quarter, yes, so far the market is going up. [indiscernible] so definitely, we will be also in line with the market appreciation.

Okay. And also could you give a breakup on your investments like what proportion is from equity and what is from fixed? Any...

[indiscernible] the total investment portfolio is about OMR 57 million. Out of that OMR 36 million is the fixed income. Then almost like OMR 19.5 million in the fixed -- sorry, equity and other investments. Then in immobile property is about OMR 2.2 million. And it is a cost price, not at market value. As we mentioned, the 2 properties, one is head office as well as our garage operation, both are valued at cost, so there is unrealized appreciation of about OMR 3.4 million.

Okay. Also on your income statement, your general and admin expenses also saw approx 33% year-on-year rise for 1H. Like what is the reason? And will it -- what's the outlook for the second half?

No, it's not -- actually, it's not an increase in expenses. It's some overhead expenses [indiscernible] between insurance operation and the other things. So there's some alignment has been done compared to last year and this year, that is the reason. Otherwise, in actual basis, there is no increase in the general expenses. Allocation between the insurance [indiscernible] and other than insurance activities, there is a slight rationalization has happened because of that, there is [indiscernible] difference and compared to last year, there is a small increase in that numbers, that's it.

Anybody has question? Nobody has any questions?

Anyone? Any questions, please?

Okay. Thank you very much for...

My question are: Insurance service expense declined Y-o-Y, what the specific cost savings were achieved? And my second question is how is tariff competition in online impacting pricing strategy, especially in motor and medical insurance?

What was the first question?

First, insurance service expenses declined Y-o-Y. What specific cost savings were achieved in this expenses?

Service expense, ma'am, you are taking about? Service [indiscernible] or service expense?

Service expense.

Yes. As Mr. Muthu Kumar clarified, service expense, some changes are there in the methodology compared to the last year. Last year, certain costs were getting allocated to the line of business, which was not relevant. So some have gone off and some have been rationalized.

Got it. My second...

Yes, second question. Can you repeat the question, please?

Should I repeat it?

Yes, please.

How is tariff competition in online impacting pricing strategy, especially in motor and medical insurance?

Yes. I think pricing continues to be challenged for both these lines of business because of the extreme competition and the results, not only for Oman United, but for generally for the industry as a whole. But yes, from our standpoint, there are certain strategies, which we have put through in the last -- since September '23 as corrective measures to make sure we are doing a little bit of more segmentation on the motor side, and certain kind of pricing decisions were taken on reviewing certain kind of businesses. So that has slowly started improving the results as far as motor is concerned. In medical, we continue to be conservative. It is extreme competition. We have grown the book almost 50% up on the medical, but we are not looking at growing the book at a loss. So our primary approach is to look at the cash flow on the premium side and also make sure that we have our own validating measures on the [indiscernible] results of the clients, which we are trying to take on board. And we also have the reinsurance partner as [indiscernible]. They are also equally involved. They are also aware of the market. So we are doing it slightly [indiscernible].

Any questions? Any questions more or we want to close the session. Thank you very much for participating, and we hope we give the right answer for your question and our feedback [Foreign Language] will be helpful and useful for the investor. Thank you very much all for participating in this session.

Thank you.

Thank you so much.