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

Good morning, everyone, and welcome to the Qatar Insurance Company Q2 2024 Earnings Conference Call. My name is Chach, and I'll be coordinating your call today. [Operator Instructions] I'd now like to hand over to Varghese David, Group Chief Financial Officer. Please go ahead.

Hi, good afternoon, everyone. Good morning. Welcome all. We are pleased to report the financial highlights of QIC Group for the six months period ended 30 June 2024. The key highlights are as follows: QIC Group reported a net profit of QAR 360 million for H1 2024 against a net profit of QAR 325 million in H1 2023 with 11% growth in net profits for the quarter. Gross written premium for the period stood at QAR 2.7 million. The Insurance Revenue for the group as per IFRS 17 for the quarter was QAR 4.31 billion and Insurance Service Results for the group for H1 2024 was QAR 339 million compared to QAR 236 million, which is around 44% quarter-to-quarter growth. The group reported a net investment income and investment other income of QAR 451 million for the period with an investment yield of 5%. The solvency ratio for the group asset Q1 2024 remains unchanged at 181%. QIC's half year results are in line with our forecast for the year and reflects the strong momentum of bottom line-driven growth the company has constantly built up over the past several quarters. While our restructured international operations now start to deliver underwriting results, the group is focused primarily on growing its presence in its domestic [ MVL ] market, an approach which has been bolstered with continued investment in its already best-in-class digital services for our -- especially our Personal lines and Health Insurance products that we offer to our customers. In a challenging global geopolitical environment where the global insurance industry had also had to face big losses, for instance, the -- during the first six months, the industry recorded the largest global marine loss through the Baltimore Bridge and the unprecedented 1 in 100-year event, flood event, which happened in UAE, QIC Group continues to deliver consistent and robust growth in profit towards core business lines and with strong financials and stable source of income. Now let me go on to gross written premium and the insurance income. The gross written premium for the period was [ QAR 4.7 billion ]. This constitutes a balanced regional and international portfolio and is aligned to the company's deliberate shift towards increasing the proportion of premium generated from the MENA region. This was reflected in the current quarter where the domestic and MENA gross written premium increased by 45% quarter-to-quarter to QAR 2.7 billion. As we move into the second half of the year, QIC is proactively pursuing further opportunities to create process efficiencies and foster automation while remain focused on the six strategy of developing on its profitable direct markets in the region, while exiting loss-making and low-margin international businesses. The results of the six strategy are evident in the evolving changes in our business mix and the composition of QIC's source of business and lines of business over the recent past quarters. As of Q1 2024, the MENA region contributes 57% of the company's overall gross written premium and the remaining 43% is generated from our international operations, primarily from our global flagship entity under Syndicate, the Lloyds of London compared to MENA premium of 19% in 2020, and 81% of international business in 2020. So here, we see the shift in the business mix, which was a strategy for the group, which we are currently delivering. In terms of lines of business, QIC is expanding its focus on primarily on short-tail personal lines and health insurance with growth predominantly coming in from our UAE and Oman operations. On the international business, during the quarter, we have successfully completed the strategic restructuring of our U.K. Motor business, which is in line with the QIC Group strategy to streamline loss-making and low-margin business and to bring back international operations for the group to profitability. This restructuring positions the group for a greater stability and profitability with the limited exposure to U.K. Motor as a reinsurer instead of direct insurer as in the previous years. As part of this arrangement, QIC Group will continue to own its Gibraltar entities to service only its existing customers and will not be underwriting any direct business to our [ Gibraltar ] entities going forward. The results of the successful completion of this restructuring is evident from the well-balanced portfolio mix between our MENA and international business, which achieved during this reporting quarter. QIC continues to strive as digital innovation in Personal Lines business, especially Motor, Travel, Home Care, et cetera, which is a key point of competitive differentiation for the company. Again, on the digital front, QIC has always been a leader, and again, on several industry respected awards, including the recent Insurer of the Year in Qatar for the third time in a row, which is gaining a widespread recognition for the exceptional [ UI and UX ] digital services we offer to our premium customers. We have brought together the leading experts in the region's insurance sector to analyze and explore the most important trends, increasing prevalence and utility of AI, which is the current buzz word. Currently, around 65% of our direct motor we write in Qatar is sold to a B2C and B2B channels. The insurance results of the group stood at QAR 339 million for H1 compared to QAR 236 million as of previous year. While the catastrophic events for the first six months of 2024 continue to impact global insurance, QIC, which is now balanced portfolio has been able to successfully weather the challenges. For instance, the Baltimore Bridge loans, which I mentioned earlier, we did have an impact to our Lloyd's syndicate, which we are well [indiscernible] risk appetite. Also, the UAE floods, which is as per the experts, it's a 1 in 100-year event, we did our exposures for our Motor and our Property portfolio. But again, I think there, we showed our resilience by having a loss, which is well within our risk appetite because we had a much diversified risk profile in our UAE book. And also we had a very strong, robust reinsurance structure. So this is a broader outline of the operations, insurance and the investment operations for Q1. And if you have any further queries, we are welcome to answer.

We will now start the Q&A session. [Operator Instructions] We have a question from [ Rashid Anwar from NC. ] As there is no response from Rashid, [Operator Instructions] Rashid has submitted a question. Please open your line [ locally ].

Hi there. You have not quite sure [indiscernible] introduction. This is Rob Skepper from Ashmore. I didn't realize my line was open. But anyway, [indiscernible] thanks very much for the call and presentation. Also thanks very much for the extra disclosure in the presentation this quarter, much appreciated. Yes, I guess my first question. Just on the discontinued ops/U.K. Motor/market study. So that's now back in as a continuing operation. Like are you able to outline what the losses were from that business in the second quarter?

Rob, thank you for the query. If you monitor from Q1 to Q2, I think as we explained, over the quarters, we have been substantially over a period of time, reducing exposure to our U.K. Motor. And as of now, for the first six months, we have not been writing any direct business throughout the [indiscernible]. So I mean, whereas for the so-called legacy book [ that we shared a little earlier, ] we have substantially taken most of the losses have been absorbed during last year. And I mean, if you -- [ to answer your specific query ], with regard to the [ discurrent ] operation separately, compared to Q1, we are not seeing any major developments in the reserves, whereas we are expecting further positive improvements as we move on. So the [ low ] status remains as we have seen in Q1, it's almost -- I would say it's a slight positive, but it's not material. It's -- I mean, on a broader basis, it remains the same as it was in Q1.

Okay. So that was about QAR 60 million loss. So in that kind of a...

In fact, our expectation is, I think that, that could be -- I mean, in order -- as we move on because we got our [ theories ] reviewing internal theories, external theories reviewing the book, I mean, which is required. So based on the updates we get, we think that, I mean, we don't expect any further deterioration to come from the reserving side. And whereas, in fact, we saw some minor [ possible ]. I mean, as I said it, it's not material [indiscernible]

Yes. Yes. Okay. Good stuff. And then in terms of like how that runoff looks like going forward, like how long does it take before it kind of close to the zero losses?

As I mentioned earlier, that I mean we -- I mean, that's the precise reason for the companies to be live and active over there in Gibraltar. Because, I mean, as an insurer, as a direct insurer, we go to honor our customers. So our expectation is that, I mean, at least for the coming year, and definitely, it's going to be very active. After that, I mean, [ we will take a call ]. What -- I mean, maybe a year or two to be more practical. So after that, we'll take a call whether -- I mean, there are a lot of revenues in front of us, maybe go for a [ loss portfolio services ]. I mean, based on the return on the risk adjusted used capital we get. So currently, our plan is we need to service our customers. We are not writing any new business coming from the direct spend. Meanwhile, make sure that we honor the commitment to our customers and to the local regulators.

Yes. Yes. Okay. Good stuff. And then...

Obviously, just to add to what Varghese said, because you mentioned specifically about the losses from the runoff. So again, as Varghese mentioned, the business is well reserved at this point in time, and we do not expect any losses when the business is put in run off. This runoff, obviously, we'll have two options in front of us, either to sell it to a runoff operator or run it off ourselves. But since we're not writing any new business in those Gibraltar companies, and being well-reserved, we do not expect any significant loss or any sort of material losses coming out of that business in the future.

Yes. Yes. Okay. And then my other question was just on the investment book. So if we look first half of this year, we see kind of a drop in cash, a bit more kind of fixed income. Is that just a case of just adding a bit of duration to the book and getting out of like short-term rates a little bit, question 1. And then question 2, is that kind of process done or is that more like repositioning what you're doing? And what is the duration of the fixed income portfolio now?

Yes. So I think you read it perfectly, Rob. It's more of a repositioning of the portfolio. The cash has dropped slightly, and that has been used to add to the fixed income book to take advantage of expected Fed rate cuts in 2024 and 2025, eventually, the interest rate is going down. What we have done is the portfolio duration, which used to be around [ 2.5% ] June 2023, which is about [ 3.1% ] in December 2023, has gone up to [ 3.43% as of ] June 2024. So there's been almost 1 point change in duration from June of 2023 to June of 2024. Again, to take advantage of potential Fed rate cuts coming in 2024 and 2025.

Sorry, what was the June number? You said 3.1% in December and what was the June number?

3.1% in December 2023 and 3.43% in June 2024.

Yes. Great. Perfect. Cool. Thanks very much, everyone. Thank you.

[Operator Instructions] It appears we have no further questions. So I'd like to hand back to the management team.

Thank you, everyone, for attending the call, and we look forward to keeping you posted with the development at QIC Group. Thank you.

Thank you.

Thank you. This concludes today's call. You may now disconnect your lines, and enjoy the rest of your day.