With all listed insurers in Saudi Arabia having published their preliminary year-end 2017 financial reports, S&P Global Ratings calculates that net income for the whole sector dropped by 55% to about Saudi Arabian riyal (SAR) 1.1 billion from SAR2.5 billion in 2016. In addition, the sector posted a modest decline in gross premiums written (GPW) and a slim increase in overall shareholders’ equity. While overall credit conditions in the market remained supportive in 2017, our recent rating actions on Mediterranean & Gulf Cooperative Insurance and Reinsurance Co. (MedGulf KSA) and Tawuniya/The Company for Cooperative Insurance reflected some company-specific issues.
The decline in 2017 net income follows and increase in earning by 140% in 2016, where risk-based actuarial pricing was more consistently applied. Overall, net earning in 2017 decline mainly due to the materially weaker results of Tawuniya and Medgulf, the largest and fourth-largest insurers in the market, respectively. While Tawuniya generated a net loss of SAR147 million in 2017 due to additional reserving requirements, compared with a net profit of SAR801 million in 2016, Medgulf reported a loss of SAR388 million due to bad debt provisioning against a a profit of SAR68 million in 2016. While we expect the Saudi insurance sector to remain profitable this year, pressure to reduce motor rates – combined with the risk of pricing additional medical benefits without historic date -could lead to lower earnings.
© Press Release 2018