QIC sees H1 results hit by soft underwriting

Qatar Insurance Company (QIC), the insurance group that owns Qatar Re and Antares, has reported that although it saw growth of 14 percent in gross written premiums (GWP) to $1.714 billion in the first six months ended 30 June 2017, it also saw its profits fall.

QIC‘s net profit came to $139 million for the first six months of 2017, down on the $165 million it reported for the same period of 2016. The company blamed the fall on politically driven investment and an ‘ultra-soft underwriting environment’.

“The financial results for the first half-year of 2017 clearly demonstrate the effectiveness of QIC Group’s diversification strategy which is predicated on tapping into global growth opportunities whilst maintaining our leading position in our home markets,” said Khalifa Abdulla Turki Al Subaey, group President & CEO of QIC Group. “With minimal exposure in the countries involved in a diplomatic rift with Qatar, it is business as usual for us.”

Offering a conservative outlook for the remainder of 2017, Al Subaey continued, “In line with our business objectives, we will continue to adapt to the changing environment and renew our focus on a bottom line driven sustainable growth strategy for QIC Group.”

For the six months ended 30 June 2017, QIC Group’s GWP grew by 14 percent to $1.714 billion compared to $1.506 billion for the same period of the previous year.

According to the company this performance ‘reflects QIC Group’s steady and systematic expansion across its global and regional target markets, lines of business and client segments’. QIC Group said that its international operations, namely its global reinsurance subsidiary Qatar Re (based in Bermuda), London-based specialty insurer Antares and Malta-based subsidiary QIC Europe (QEL) were instrumental in growing the Group’s volume of business. During the first half of 2017, these subsidiaries contributed 89 percent to the Group’s combined premium growth.

As at 30 June 2017, Qatar Re, Antares and QEL accounted for 71 percent of QIC Group’s total premium volume, up from a 69 percent share a year ago.

In its domestic market, Q Life and Medical Insurance Company (QLM) contributed significantly to the Group’s performance, growing its premium income to $190 million (up 17 percent) from $163 million for the same period last year.

Premium income from the countries involved in the political standoff with Qatar does not represent a material portion of the Group’s revenues.

Despite continued global financial market volatility and regional diplomatic and economic turbulence, QIC Group generated robust investment income of $155 million in the first six months of 2017 ($132 million in H1 2016). The annualised return on investment amounted to 5.7 percent for the first half of 2017, significantly in excess of the global industry average.

QIC Group stated that its investment exposure to those countries involved in the diplomatic rift with Qatar is minimal.

Qatar’s domestic financial markets have proven resilient to the most recent challenges. Over the past six weeks, the country’s key stock market index has recovered to the level before the regional political standoff.

Moreover, most regional and international observers do not expect any material adverse impact of the political standoff on Qatar’s economic growth performance, even under a prolonged scenario.

QIC Group’s net underwriting result came in at $72 million for the first half of 2017 (vs. $120 million in H1 2016). The Group’s non-life combined ratio stood at 101.5 percent against 96.9 percent in the previous year.

The half-year performance was materially affected by the UK Government’s decision to drastically cut the Ogden Discount Rate, which shook up the UK motor insurance market, with an expected industry-wide reserving hit of over $10 billion. QIC Group has a major underwriting footprint in the UK and decided to strengthen its motor reserves by $31 million. In addition, first half performance was impacted by a few large risk losses in the Group’s international operations.

Overall, QIC Group’s underwriting performance continues to benefit from its strong commitment to technical and analytical underwriting as well as effective enterprise risk management.

The implementation of effective cost control policies, in combination with an accelerated pace of work process automation resulted in a slight decrease in the administration expense ratio to 7.90 percent against 8.10 percent during the same period in 2016.