By: Mahmoud Gamal
Dubai – Mubasher: The UAE’s insurance companies will see a growth in profits ranging from 20% to 40% in the third quarter of 2017, financial analysts told Mubasher.
The net profits of 28 companies listed on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) increased by 27.2% year-on-year to a combined AED 766 million in the first six months of 2017.
These companies’ gross premiums grew 16.6% to reach AED 12.19 billion in H1-17 compared to AED 10.45 billion in the comparative period of 2016.
The Dubai government’s decree imposing medical insurance on all persons enjoying residence in the emirate forced around 500,000 people to subscribe to the medical insurance system before the end of the grace period set forth in the decree, analysts stated.
Medical insurance levy decree has already yielded and will yield strong revenues for the insurance sector, they told Mubasher, noting that the decree raising the minimum price of car insurance policies by 50% to 70% continues to support the market.
Allianz’s plan for acquisition in large insurance companies in the UAE is a positive indicator of the global players’ role in the local insurance market, MenaCorp financial analyst Issam Kassabieh told Mubasher.
In September, Reuters reported that Allianz expressed interest in a 24% stake in Abu Dhabi National Insurance Company (ADNIC), the UAE’s third biggest insurance firm.
Insurance firms’ revenues will grow as the levy of the value-added tax (VAT) approaches, Kassabieh continued, noting that the tax is slated for January 2018.
The new Saudi decree allowing women to drive will also boost the UAE’s automotive market along with relevant insurance premiums, which the analyst forecast will rise by around 25%.
Mena Corp financial analyst further stated that the insurance companies could generate profits up to AED 1.5 billion by the end of 2017.
The beginning of a recovery
The fierce competition between insurance companies has resulted in a dilemma in recent years, said Fadi El Ghattis, MindCraft Consultants’ CEO.
Under the strong support of the UAE’s government, the sector began to recover since the beginning of 2017 and achieved good results in the first six months, he added.
Mergers are a strategic option for insurance companies to develop and improve the sector, which will result in the establishment of stronger entities, El Ghattis explained.
He concurred with Kassabieh regarding Allainz’s interest in ADNIC, noting that such an investment indicates that foreign investments may flow into the sector.
Merger will fit the bill
Analyst Waddah Al Taha forecast that the UAE’s insurance companies will begin a merger trend, stating that mergers will create puissant entities that will be able to expand regionally.
Mergers should be carried out under the instructions of the UAE’s Insurance Authority (IA), said Al Taha, noting that the government’s decisions are the main cause of high profit expectations.
Translated by: Muhammed AbdulWakeel