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UAE insurance firms’ profits slump 23% to Dh1.52 billion

Lower rates, rise in commissions hurt bottomlines

The UAE insurance sector’s net profit slumped by nearly one-fourth year-on-year in 2022 due to a reduction in rates and an increase in commissions.

According to a study released by Badri Management Consultancy, the UAE-listed insurers’ profits dropped by around Dh462 million or 23 per cent to Dh1.52 billion in 2022 as compared to Dh1.99 billion in the previous year.

“While the numbers show a decrease of 23 per cent, the underlying situation could be much worse due to a few factors that are not captured by these results. A key factor being inter-company receivables... There is a possibility that between the issuance of preliminary and final audited accounts, there could be a revision in profits due to scrutiny by the auditors,” said Hatim Maskawala, managing director, Badri Management Consultancy.

The local listed insurers’ gross written premiums increased by 11 per cent to Dh29 billion last year, up from Dh26 billion in 2021. The top three insurers accounted for Dh2.8 billion of the total increase.

The highest gross written premium insurers last year were Orient, Abu Dhabi National Insurance Co., Oman Insurance, Dubai Insurance and Emirates Insurance.

The UAE also introduced a mandatory job loss insurance scheme for residents working in the federal government and private sector early this year, which industry analysts expect will help improve the bottom line of the local firms.

Starting from January 1, 2023, more than 60,000 employees registered in the first two days of the launch of the scheme. The UAE government has also asked the companies to encourage their employees to register for the mandatory scheme. Failure to register before June 30 will result in a Dh400 penalty to employees.

“The industry also benefited from some mandatory schemes which inflate the top line since the local companies cede business to each other,” said Maskawala.

With the significant impact on profitability, the requirements to show solvency positions publicly and the onset of IFRS17 which speeds up the loss recognition for onerous contracts, Maskawala sees 2023 as a year where the UAE Insurance Industry will have to focus on fundamentals in terms of pricing, risk selection and overall risk management.