Qatar General Insurance & Reinsurance Company Q.P.S.C. (QGRI) Earnings Call Transcript & Summary

Hello. Good day, and welcome to the Qatar General Insurance & Reinsurance Conference Call. Please note that this call is being recorded. I'd now like to hand over to the moderator for today, Roy Thomas. Thank you. Please go ahead.

Hello, everyone. This is Roy Thomas from QNB Financial Services. I want to welcome everyone to Qatar General Insurance & Reinsurance Company's Fourth Quarter and Year-end 2023 Financial Results Conference Call. On this call from Qatar General Insurance & Reinsurance Company, we have Khalid Alaswad, the Group Chief Financial Officer; and Zaid Anani, the Treasury & Banks Relationship manager. We will conduct this conference call with management first reviewing the company's results followed by Q&A. I will turn the call now over to Zaid Anani. Go ahead, Zaid.

Thank you, Roy. Good afternoon, ladies and gentlemen. Welcome to the earnings conference call of Qatar General Insurance & Reinsurance Company, which will be referred to by QGIRCO or the company going further for the financial year that ended on 31st December 2023. I am Zaid Anani, QGIRCO's Investor Relations Officer. It is worth starting our investor call with the disclaimer. Thereafter, we will provide you with a summary of our operational and financial results. I will now read out the disclaimer to this conference call. This call may contain, constitute or imply information or forward-looking statements regarding the operational or financial performance and future of QGIRCO or any of its subsidiaries. Such statements are based on the current expectations and assumptions of QGIRCO's management to their best knowledge and diligent assessment. As such, QGIRCO, its directors and its officers shall not be liable for any costs or losses resulting from using forward-looking statements through this call. I'm delighted to give the floor to my colleague, Mr. Greggy Bueno, who will discuss the company's financial results and the operational update.

Thank you, Zaid. Our insurance revenue reached QAR 768.2 million in 2023, compared to QAR 717 million for the same period last year, showing an increase of 7%. However, the insurance revenue result was QAR 14.8 million in 2023 compared to QAR 79.2 million in 2022, because of the impairment provisions recorded in 2021. The investment results for the year were significantly impacted by the decrease in fair valuation of the investment properties, together with the reclassification of certain investments as disclosed in our consolidated financial statements. QGIRCO continues to be in good financial condition, with total shareholders' equity of QAR 3.3 billion of 31 December '23. I will discuss the financial results in more detail before handing over to our colleague, Mr. Zaid Anani, to take you through the outlook. To start, I will provide the high-level results before we get into the details. QGIRCO's total gross written premium for 2023 stands at QAR 790.7 million compared to QAR 724.6 million for the same period last year, representing an increase of 9%. The group's insurance profitability has decreased compared to 2022 as a result of the impairment provisions recorded this year. The finance costs reached QAR 78.9 million during the period compared to QAR 58.1 million for the same period last year, mainly due to the increase in interest rates. The fair value losses on the investment properties of QAR 1.3 billion and the net impact from loss of significant influence over the Algerian associates of QAR 199.7 million were the main reasons behind the substantial loss in the investment results. Additionally, the group has recorded a positive impact on the loss of control of a subsidiary amounting to QAR 120.3 million. However, impairment losses of financial assets of QAR 131.7 million have further impacted overall results of the group. The above resulted in the shareholders' net loss of QAR 1.47 billion during the year and losses per share of QAR 1.675. Now I'm handing over to Mr. Zaid Anani to take you through the outlook.

Thank you, Greggy. The general outlook on Qatar economy is expected to continue normalizing in the near term after receiving a boost in 2022 from hosting the World Cup. The IMF forecast GDP growth rate of 1.9% for Qatar in 2024 and state that the country has shown resilience to recent global shocks with a favorable economic outlook. Firstly, I will discuss QGIRCO's insurance business. QGIRCO's insurance business continues to find a strong footing through the country's infrastructure growth, digital transformation, oil and gas projects, and, most importantly, the rollout of the mandatory health insurance plans for expatriates and the families as well as visitors. Secondly, regarding QGIRCO's investment in real estate business, it is expected that the income from the real estate business to improve during the first half 2024 as the company is now in the final stages of renting Alaama Tower. With regards to the investment outlook, the Qatar market is expected to [ improve ] this year after lagging its peers, driven by the strong performance of listed companies. Moreover, the anticipated ending of the monetary tightening cycle should have positive impact on the company's portfolio, which is predominantly comprised of local issuers. Additionally, the company's direct equity investment in Algeria continues to deliver a solid performance as expected. Finally, highlighting the effects of QGIRCO's income statement and balance sheet. From an income statement level, financing costs are expected to remain stable with a reasonable probability of decreasing this year due to the anticipated end of quantitative tightening cycle, as well the company's plan to deleverage. Additionally, the company expects a significant boost in QGIRCO's income in 2024. On the balance sheet level, the company will also be focusing on introducing its real estate exposure, thereby achieving better diversification for its investment portfolio. With this being said, it is worth to note that the outlook has been fully presented, and I would like to note that this call and the fact sheet will be available on the Investor Relations section of our website, www.utuc.com, by the end of tomorrow. Kindly feel free to reach out to us through the contacts in the Investor Relations section. Ladies and gentlemen, on behalf of the whole of QGIRCO team, thank you very much. We wish you a great day ahead. If you have any questions, please go ahead now.

[Operator Instructions] Our first question comes from Anastasios Dalgiannakis from Al Faisal.

If I may go through them one by one. The first question I have is regarding the impairments. Now we have QAR 1.3 billion total. Correct me if I'm wrong, but it seems like there is a QAR 600 million in there for the project under development and QAR 700 million on completed properties. Now if we go to the project under development, when we discussed this topic in a previous call, the conclusion was the QAR 1.6 billion referred to the West Bay Forty Four Hotel tower project that you have in Westbay that is idle at the moment. Now what I see is that you passed it on to the bank, which I assume is still QNB as you mentioned in the previous call, for QAR 1 billion. You took QAR 600 million impairment and you still left on the books QAR 280 million. So my question is, if you don't mind, is what is left over on the projects under development at the moment, the QAR 280 million?

Let me -- Khalid Al-Aswad speaking, Group CFO. Okay. First of all, we have to differentiate between this loss from impairment from Algeria, our associates in Algeria not in Mazoon, okay? We have Mazoon some contractors [indiscernible], okay, with an impairment because we changed the accounting policy, how to account for Mazoon real estate. We used Mazoon as subsidiary. Now we changed for joint venture, as you know, that's a problem with bank and the other partner, okay? So we evaluate the project before transferring it to a joint venture. This one leads to a drop in land value and construction value. okay? And impairment is for some payments made by our group, okay, when the bank or QNB stopped the financing of the project. So now, in our book, Mazoon project, joint venture, value is 0.

Correct. So you have passed it on to QNB basically against the loans?

Yes.

All right. And the QAR 280 million still left on project under development, what exactly is this?

No, QAR 180 million?

Yes, QAR 280 million is still on the books under project under development. What is this -- which project is this?

Project under development? No.

On Page 48. On Page 48.

It's land. It's land. It's land, because of the land now under QGIR books. Land.

But it's not vacant land. You have another account. Because the land is QAR 986 million, it's another line. This is project under development.

Yes, yes, yes. This is not -- this one is vacant land. But just at development, our share in land, [ 50 vacant ] land, okay, still in our books. This is our land, our share in land on the...

Okay. So this is in Westbay or somewhere else?

No, the same. The same. This one -- this land under construction, that same land used for Mazoon construction.

Okay. The land where the project sits on, that's the QAR 280 million basically?

Yes, yes. Exactly. Yes, it sits on the land. Yes.

Okay. Now my next question, if I may, on -- you have put investment under OCI on the assets, which predominantly international and real estate. QAR 880 million is real estate, international real estate. So can you tell us, please, what project is this? What real estate? What rental income you expect out of it, how it was funded?

Now we have a share in some companies in -- outside Qatar, mainly in Algeria. We use -- they're classified as associates. Now we lost control over these projects or these companies, okay? So we changed accounting policy from associates to over OCI, okay, and the [ qoute ] is here. Okay. One of the projects we have there -- we have 3 companies there, bank, okay, and insurance, and we have investment company that own a project called Bab Ezzouar, it's a huge project in North Africa, okay? It's -- I think now it's final stage, okay, some of it. Because it's a huge project. They start soft launching before corona, but -- COVID-19, and due to COVID-19, there was one still remaining.

Okay. And how are you going to fund this project?

Well, we'll not fund. They have shares in this company, not we have owned the project. It's not our project. This real estate company, that we have own shares in this company, and they are in the final stage now.

Okay. And rental income on the -- what income do you expect out of this project, the real estate, the QAR 900 million?

My friend, now this one -- as now, we're accounting policies this one, okay, just over OCI. What we receive from them, that's their profit, but dividends. Other than this, we'll not record anything. We don't know anything about this project. Because if we still know that, okay, we'll keep associates.

Right. Okay. Okay. And if I may, one last point is the completed properties. Now you reduced them by QAR 700 million. Now we reduced it last year by QAR 500 million. Now QAR 700 million. Rental income is still at QAR 10 million. Now after the loss of [ QE ] as tenant, there has been a reduction and has not recovered. So rental yield remains very low. It indicates that it should be written down further without rental income out of this project. So why did you decide to stop now at another QAR 700 million and you -- it seems like it's growing every year bit by bit by bit and not do a proper adjustment in one shot of the correct valuation for these completed properties?

Allow me to understand here. You know that the discounted cash flow is reversed by WACC, weighted average cost of capital, right? And as you know, last year, the WACC is now for -- high now. High. Last year, 2023, it's very high. But high WACC means less value, right? And now in a final stage for this project, okay, in our final stage. We don't have enough information as it's confidential now on that at this stage. And we're assuming that the rent will be less than the previous, okay, tenant. So this one, valuation will be the same last time, I think it will drop again. It will not drop again, because now WACC this year as before, we anticipate it to be less.

But the top line, the problem is in order to get QAR 1.5 billion, even if you have less WACC, you would need the rental income, which is many multiples the current rental income. You have to go more than QatarEnergy, which was QAR 80 million. Now are you -- do you have something like this? Do you have something like this to come?

Yes, yes, we will review all our scenarios. And we know this will be the same or more this year.

This year, you mean in '24, you will get rental income of -- what is your expectation for '24?

I cannot just now disclose, okay? We'll disclose that when we be now in final stage, okay? We'll see the [ rent ] from them, okay? So we expect it to be rent out in July, I think, starting the quarter. After that, we'll disclose for sure when we have them in.

Okay. And the final, final question. The -- you have a disclosure on undiscounted leases, okay. that are consistently higher than realized rental income. Why is there a discrepancy?

Where was this mentioned?

On Page 48, there is a disclosure on discounted leases that is in excess, consistently in excess of realized income.

Because what we expected to receive this year, okay, just for this year, because this will be partially this year.

But last year, it was QAR 80 million and it was QAR 10 million of rental income.

Yes, because we already rented out some of our factories this year -- last year.

Okay. So is the QAR 43 million that you expect in 1 year, is this going to be realized, the QAR 43 million?

Yes, yes. This year.

For '24?

Yes, yes, yes. This year.

This is without the -- this includes or it does not include the agreement you just mentioned, includes the agreement you mentioned?

Yes, we include it. Yes, it's included there. Included.

It looks like we don't have any raised hands as of the moment. I'd now like to hand back over to the management for their final remarks.

If there are no further questions, we'd like to thank Qatar General Insurance & Reinsurance Company's management for the results update and answering the queries, and look forward to speaking to you all for the first quarter 2024 results conference call. Thank you.

Okay. Thank you, Roy. Thank you. Bye.

Bye.