Qatar Insurance Company Q.S.P.C. (QATI) Earnings Call Transcript & Summary

Thank you all for joining. I would like to welcome you all to the Qatar Insurance Company's Q1 '24 Earnings Conference Call. My name is Brecca, and I will be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Pradeep Kumar, Investor Relations Manager of QIC to begin. So Pradeep, please go ahead. Thank you for joining. I would like to welcome you all to the Qatar Insurance Company Q1 2024 Earnings Call. And I would now like to pass the conference over to your host, Pradeep Kumar, Investor Relations Manager of QIC to begin. So Pradeep, please go ahead.

Yes. Good morning, all. Welcome to QIC Group's Q1 '24 financial results conference call. The speakers today are Varghese David, Group Chief Financial Officer; Chirag Doshi, Group Chief Investment Officer; Mena Mounir, Senior Vice President. I'll now hand over to Varghese David for his financial remarks.

Good morning all. I welcome all to our quarterly investor call. We are pleased to report the financial highlights of QIC Group for the 3-month period ended 31st March 2024. The key highlights are the following: QLC Group reported a net profit of QAR 194 million for the quarter, 2024 against a profit of QAR 175 million last quarter, which is 11% compared to the last year. The gross written premium for the period stood at QAR 2.75 billion. The insurance revenue as per IFRS 17 for the quarter was QAR 1.64 billion, and the insurance service results for the quarter was QAR 201 million. The group reported a net investment income and other income of QAR 227 million for the period with an investment yield of 5.2%. The solvency ratio for the group at Q1 2024 remains unchanged, and it's at 189%. The first quarter for the year, we started buoyancy, where we saw the company consolidate and build upon the progress it's made over the previous years. With the renewed focus on strengthening profitable domestic and the regional businesses, extending its exceptional digital offering and strategically improving its international operations, while reducing exposure to underperforming markets. Despite the challenging global geopolitical environment and the reported insurance events during Q1 2024, QIC continues to enjoy robust growth in profit through its core business lines, strong financials, and stable sources of income. Now going to the details, the gross written premium and insurance income. The gross written premium for the period stood at QAR 2.75 billion, a result underpinned by the company's strategy to increase the proportion of its premium generated in domestic and MENA markets. QIC's Q1 vessels are a testament of the effectiveness of the company's long-term strategy on focusing onto profitable markets in Qatar and the MENA region, while exiting loss-making and low-margin international business. Domestic and MENA gross written premium reached QAR 1.4 billion for Q1 2024 compared to QAR 900 million for the same quarter last year. As we have been referring in our previous investor calls, the group's strategic focus was to build a balanced portfolio between MENA direct business and the international business, which you like, through our Antares Global brand. The results of this strategy are evident in the striking changes in our business mix and compensation of QIC source business and the line of business over the recent years. We are pleased to note that as of Q1 2024, MENA region contributes to 42% of the company's overall gross written premium, whereas the international is contributing 48%, which is compared to the previous years in 2020, MENA's contribution used to be 19% only and the international was 81%. So this is in line with our Fit strategy to have a balanced portfolio and that objective we have achieved in Q1 of 2024. In terms of lines of business, QIC is expanding its focus on personal lines and health insurance, which is almost double as a percentage of gross on premium. I mean, it used to be 5% in 2022, which is currently 14%. And we've also seen growth coming in marine and aviation lines of business during the quarter. QIC continued digital innovation in personal lines, especially motor, travel, and home care and other personal products, is a key point of competitive differentiation for the group through multiple new features and new products introduced to the online and mobile platform, we offer to our customers in Qatar and across the GCC, unparalleled convenience when buying a policy or the settlement of a claim and this has been reflected in our growth, which you have seen currently in the personal lines of business -- of our direct personal lines of business in the GCC. Currently, for instance, we write almost 65% of the business we write motor and the personal line business in Qatar through B2C and B2B channels. Meanwhile, in the international front, the company has reduced its exposure to the motor insurance, particularly in the U.K., which has been adversely fitted by supply chain challenges influenced by Brexit, inflation resulting in a greater volatility and risk. QIC has also brought down the international operations, which have continued to -- I mean, QIC is new, I mean, the international business, which has been exiting over the period of years, the loss-making business, currently continued to perform strongly in the first quarter of 2024 with increasingly healthy combined ratio, reinforcing the company's international turnaround story. This was largely been driven by the success of our Antares Global brand, which is primarily driven by Antares Lloyds Syndicate with a premium volume of QAR 1.3 billion in Q1 2024, compared to QAR 1.8 billion in the same period of last year. The insurance results of the group stood at QAR 201 million. Overall, I mean, we have reported a profit of QAR 194 million with 11% growth compared to last year. So this is the general overview of our results for Q1. And if you need to have any further queries or clarifications, we are there to answer.

We are happy to take questions, if any.

[Operator Instructions] We have the first question on the phone line from Rob Skepper of Ashmore Investment Management.

Thanks for the call today, much appreciated. Just a couple of questions. So looking like the loss from the discontinued operations, is that with business line in there this quarter? Is that primarily U.K. motor still? And what else is included in that?

Yes. Okay, I can answer this first. Yes, you're right. It's only a U.K. motor business. And if you notice, I think that's substantially reduced from quarter-to-quarter. And I mean, as of now, we have hardly written any direct business arising out of U.K. Motor, for Q1 2024. So we expect that, this to further -- over the quarter to further reduce as we move on.

Okay. Got it. And so -- and what's the plan there now in terms of exit or winding it down?

Yes. Okay. I think, that's an important question. See, as we've been updating, see, we already have an SBA signed for the sale of our Gibraltar entities. As of these, while we speak, the matter is with the Gibraltar regulator, and we are expecting their response in the coming months. As per the SBA, the long stop date is end of June. So in an event, if the sale is not going through, we have a plan B, which is predominantly to put these entities on a turnoff. The impact for QIC Group will be, we will not be writing any U.K. motor direct business, which has been one of the key reasons for the losses, which we had in the previous years. So if the sale is going ahead well and good, but if it is not happening before 30th of June as per the SBA, we move on to a run-off mode. So we are -- in short, we are prepared for both the scenarios as obtained.

Yes. Okay.

Just to add to what Varghese said, I think the plan B is not just on paper. It has been agreed with the counter-parties involved. And it's something which, as Varghese said would have, if implemented, would have a very, very minimal impact, if any, on QIC's bottom line. So we -- the plan B basically secures an another way of an exit from this relationship of U.K. Motor for QIC by putting the companies in runoff, no direct business. There is potentially a small capacity provision on the reinsurance side with all the protections to ensure that there is no downside for QIC.

Yes. Okay. Got it. And in terms of the contribution for GWP for the quarter from that business?

See, if you see, I mean, specifically from this Gibraltar business, and to be very specific, we're not written any direct business, I mean, for Q1 2024. But having said that, in our reported numbers, there is a small component of -- I would say, it's less than $5 million, which is primarily arisen from the endorsements to be very specific in [indiscernible] specifically. So as of now, I mean, we don't have any premium written coming in, but there are -- as I said, there are some endorsements and some claims being, I mean, incurred claims mineralizing which is minimal from an overall perspective.

Okay. Got it. And then just changing projects entirely. And in terms of the -- in terms of changing the focus of the business, more focus on domestic regional or less on international. In terms of the final mix of GWP, what's the current thoughts on the target there between the 3 verticals: the international, domestic and regional?

I mean, so that is the key, I mean, for a company. I think strategically, this is a key objective being achieved because, I mean, as I told in my initial remarks, a couple of years back, the domestic only used to be 19% of the overall business. So I mean, we have set a plan to achieve a balanced portfolio, a balanced business mix. So as of date, as we speak, the domestic direct business contributes 42% of the overall business, and the international in 48%. So our target is sort of a 50-50. I mean, so we are happy with what we achieved now, but we are seeing growth coming in the region, and these are predominantly coming in from the personal lines and the health sector, which we think, I mean, with our digital capabilities we have with -- because we're being the leader of the personal line digital transformation journey in the region. So we have an edge day. And also, the health is -- health and life is an interesting area for us. We see this as a smart risk diversification tool also. So overall, I mean, we predominantly see the growth -- I mean, healthy growth, bottom line-driven growth coming from the region. While in the international front, we focus through our Lloyd Syndicates, I would say almost 80% of the business we write in international, it's certain to the Lloyds Syndicate. So that way, I mean, we are reasonably confident that the international portfolio, the volatility which we had in the previous years, which was predominantly arising from the Gibraltar business, I mean, which we are writing. Now in the coming months, the clarity will emerge with the sale happening or the runoff happening. So both ways that is not going to change in any way the international dynamics for the group. And overall, I think that puts us in a much better robust position.

Yes. Yes. Okay. And then just the last one. I saw in the results press release, there was a comment about combined ratio. Like is there any plans to -- because obviously, with IFRS 17, like we can't necessarily kind of see these old metrics. Is there kind of any plans to do like a bit more kind of enhanced disclosure, so we can see like some of the kind of underlying underwriting trends?

See, I mean, if you're referring to the combined ratio, see, I mean, with regard to IFRS 17, we're very conscious because that's -- it's still emerging. There are different thoughts of -- coals of thoughts on how the IFRS -- the combined ratio has been worked out. But I mean, what -- I mean, we are focused on -- we are focused on the bottom line driven growth. And with this -- and we are focusing on the direct regional business. Meanwhile, international, we are -- as of now, we are exited out of all the low-margin loss-making business. So overall, I mean, our target is to achieve the targeted ROE for the group, and which -- I mean, for this year, we are expecting that in early double-digit growth, I mean, ROE. So towards that, I think, I mean, the first quarter results are showing. I mean, we are happy with what we have seen. And then despite the challenges, if you also noticed for Q1, I mean, globally, insurance industry had a couple of losses coming in. So I mean, despite those losses, we are able to report a healthy bottom line and a healthy combined ratio. So our expectation is, I mean, we'll be able to continue this journey of a healthy insurance bottom line, supported by a stable and consistent investment.

Yes. Okay. And then last question, you mentioned health is a growth driver. Like any news on managing health insurance in Qatar?

No. See, as of now, I think, I mean, other than the public information we have, I think we don't have any further update. In Qatar, as the health is, it's predominant for us as QIC Group, it's written by QLM, which is our associate company. But we are seeing for QIC Group, we are seeing health -- I mean, growth coming in, as I said earlier, in the personal lines and health is also a contributor, which is predominantly coming from Oman and UAE operations. So there's more clarity. But in Qatar, if it comes, yes, I mean, there is a potential for QIC also. But as of now, to answer your query, I think, we don't have further updates, but it is expected. It is definitely the concerned authorities will be taking a position. So this is the latest update we have.

[Operator Instructions] We currently have no questions registered. So I'd like to hand it back to the management team for any closing remarks.

I think, see, -- I mean, if you have no further queries, I think we are happy to close the call. And if you have any further queries, you can communicate to our Investor Relations team to get the necessary responses. Thank you. Thank you, everyone.

Thank you all for joining today's call. I can confirm, this has now concluded. Please now disconnect your lines and enjoy the rest of your day.