Best’s Commentary: Profits Continue to Rise for National Insurers in the United Arab Emirates
The insurance market of the United Arab Emirates (UAE) maintained its impressive momentum in 2019 to post a third consecutive year of profit growth.
The insurance market of the United Arab Emirates (UAE) maintained its impressive momentum in 2019 to post a third consecutive year of profit growth.
AM Best’s analysis of the preliminary disclosures of the national insurers listed on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) found improvements in overall performance, combined with good premium growth.
A new Best’s Commentary titled, “Profits Continue to Rise for National Insurers in the United Arab Emirates”, reveals UAE-listed insurers’ shareholders’ equity reached AED 17.5 billion in 2019, up from AED 16.5 billion the previous year, benefiting from profit generation. Overall, companies in the UAE are well-capitalised and have the capacity to accommodate additional underwriting risk.
Despite gross premium growth of 8.3% in 2019, there was a small decline in aggregate underwriting profits (i.e., premiums less claims) for UAE-listed insurers of 1.1% to AED 1.7 billion.
Salman Siddiqui, director, analytics, at AM Best Europe Rating Services, said: “Underwriting returns benefited in 2017 and 2018 from improvements in pricing and underwriting discipline as a result of regulatory changes in the key business lines of motor and medical insurance. However, the decline in underwriting profits in 2019 suggests pricing pressure and raises concerns regarding medium-term rate adequacy on these lines.”
Although underwriting returns declined, net profits for listed insurers showed an exceptionally strong increase of 21.2% to AED 1.6 billion in 2019, implying that companies benefited from strong investment returns. Overall, the market generated a return on equity (ROE) of 9.5%, above the previous year’s return of 8.0%.
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