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Omani insurers get profit boost as lockdowns reduce claims

8 Mar 2021

Insurance companies in Oman have received a profit boost for the year 2020, thanks to fewer motor and medical claims because of strict coronavirus-related lockdowns that cut the amount of traffic and accidents last year.

As per the estimates from S&P Global Ratings, Oman’s insurance market is expected to report a significant improvement in profitability of about 50 per cent for 2020 versus 2019.

National Life & General Insurance Co (NLGIC), the largest insurer in the sultanate, delivered strong financial results despite the challenging circumstances during 2020. NLGIC’s net profit jumped by 47 per cent to RO15mn for the year ended December 31, 2020 compared to RO10.2mn net profit reported for the previous year. Improved underwriting results and investment income, according to the company, contributed to the sharp growth in profits.

‘The company experienced positive impact of the lockdowns in terms of shifting customer preferences from paper-based transactions to electronic mode of transactions by adoption of digital technologies as well as reduced claims reporting during the months of lockdowns in medical and motor portfolios,’ NLGIC said in its yearly financial report submitted to the Muscat Securities Market (MSM). NLGIC board has proposed a cash dividend of 35 per cent of the share capital for 2020 amounting to a total dividend of RO9.275mn.

Insurers’ operating performance strengthened in 2020, thanks to fewer motor and medical claims amid the pandemic, S&P Global Ratings noted in a report titled ‘GCC Insurers in 2021’. A decline in motor and medical claims, S&P said, led to stronger underwriting results in 2020.

Dhofar Insurance Co achieved an impressive growth in both underwriting results and investment income for 2020. Its net profit rose by 42 per cent to RO3.8mn for the year 2020 against RO2.7mn net profit recorded in 2019.

Oman United Insurance Co also reported a 25 per cent growth in 2020 net profit at RO4.25mn compared to RO3.4mn net profit in the previous year.

Oman Qatar Insurance Co (OQIC) informed the Muscat Securities Market that its net profit for 2020 surged by 64 per cent to RO2.12mn in comparison to RO1.29mn reported in 2019. The increase in profit was majorly contributed by positive investment growth and decrease in general and admin expenses due to the COVID-19 related lockdowns, the company said.

Another insurer Al Ahlia Insurance Co said its 2020 net profit increased by 7 per cent to a new record of RO4.38mn compared with RO4.11mn in 2019.

‘The increase [in profit] was supported by a 21 per cent rise in investment income to RO2.09mn. There was also a 23 per cent reduction in total operating costs due to a fall in claims driven by the COVID-19 lockdown, travel restrictions and slow market activity,’ Al Ahlia Insurance said in its yearly financial report to the MSM. The company added that the demand remains strongest in non-life insurance market, particularly within the health insurance segment where awareness of the benefits of cover has risen during the pandemic.

According to S&P, Omani insurers’ profitability in 2021 will likely decline due to a more normalised level of claims and potential volatility on the asset side.

Al Madina Takaful in its yearly report said the company continues to show resilient financial performance and exceeded its insurance operation budget for 2020. 

The profit of the company increased by 51 per cent to RO1.8mn in 2020 compared to RO1.2mn in 2019.

However, weaker economic conditions and an estimated 12 per cent decline in expat population led to a decline in gross written premiums by 4-5 per cent in Oman’s insurance market in 2020, S&P Global Ratings said.

As the pandemic and economic slowdown last year softened the demand for insurance products, many Omani insurance companies reported significant drop in premiums.

NLGIC’s gross written premiums declined by 10 per cent to RO134mn in 2020 against RO146mn in 2019. ‘However, the positive impacts of the lockdowns brought down the net loss ratio of the company to 70 per cent in 2020 from 75 per cent in 2019 resulting in a 32 per cent increase in the net underwriting results,’ NLGIC said.

Al Ahlia Insurance’s gross written premiums fell 20 per cent to RO19.1mn in 2020, while OQIC reported 8 per cent increase in gross written premium at RO31.28mn in 2020 from RO28.94 in the previous year.

Although Oman is preparing to implement a new compulsory health insurance scheme that should boost insurance premiums in the coming years, S&P forecasts a further modest decline in gross written premiums in 2021.

‘The government will introduce a value-added tax of 5 per cent from April 2021, which could create additional one-off costs for insurers. Nevertheless, we anticipate the market will report a combined ratio of 92-95 per cent in 2021,’ S&P added.

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