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The Mediterranean and Gulf Insurance and Reinsurance Co. announces its interim Financial results for the period ending on 2019-03-31 ( Three Months )

MEDGULF 8030 -0.73% 24.56 -0.18
Element List Current Quarter Similar quarter for previous year %Change Previous Quarter % Change
Gross written premiums (GWP) 1,077,243 413,616 160.445 541,712 98.858
Net written premiums (NWP) 683,057 348,748 95.859 471,897 44.747
Net incurred claims 443,097 420,634 5.34 480,262 -7.738
Net profit (loss) of policy holders investment 4,909 3,153 55.692 2,066 137.608
Profit (Loss) Insurance Operations minus policy holders investments from operations 1,103 -26,064 - -97,411 -
Net profit (loss) of shareholders capital investment 3,542 611 479.705 4,468 -20.725
Net Profit (Loss) before Zakat 7,035 -23,272 - -92,824 -
Total Comprehensive Income 8,803 -23,313 - -92,735 -
All figures are in (Thousands) Saudi Arabia, Riyals
Element List Current Period Similar period for previous year %Change
Total Share Holders Equity (after deducting minority equity) 677,914 473,396 43.202
Profit (Loss) per Share 0.09 -0.5
All figures are in (Thousands) Saudi Arabia, Riyals
Accumulated Losses Capital Percentage %
-269,547 800,000 -33.69
Element List Explanation
Reason for increase (decrease) in net profit for current quarter compared to the same quarter of the previous year The reason behind the net profit during the current quarter compared to net loss during the same quarter of the previous year is the increase in net underwriting result by 63.5% due to the increase in net earned premium. Furthermore, during the current quarter the company has reversed its doubtful debt provisions amounting to SR 11.2 million comparing to 0.036 million during the same quarter of the previous year.

The reason behind the increase in shareholders investments income during the current quarter compared to the same quarter of the previous year is the increase in special commission income by 55.7%.

Reason for increase (decrease) in net profit for current quarter compared to the previous quarter The reason behind the net profit during the current quarter compared to net loss during the previous quarter is the income in net underwriting result comparing to loss in net underwriting result mainly driven by the increase in paid claim by 14.3% during the previous quarter comparing to the current quarter. In addition, during the previous quarter, the company has increased its provision for doubtful debt amounting to SR 12.2 million comparing to a reversed of doubtful debt provisions amounting to SR 11.2 million during the current quarter.

The reason behind the decrease in shareholders investments income during the current quarter compared to the previous quarter is the decrease in income from investment in associate.

Type of the external auditor's opinion Qualified opinion
External auditor's report containing reservation BASIS FOR QUALIFIED CONCLUSION

1) As disclosed in note 11 to the accompanying interim condensed financial information, all reinsurance treaties up to the underwriting year 2014 were managed by the Medgulf Group Corporate Reinsurance Center (“CRC”), a related party, who dealt with the Company’s transactions, along with those of other related parties, on a consolidated basis with the reinsurers and brokers. All transactions with reinsurers and brokers were routed through CRC and the settlement of balances with these reinsurers and brokers were also made by CRC. The Company, together with CRC, have now initiated an exercise to separate the Company’s transactions and balances with the respective reinsurers and brokers from those of other related parties. This exercise is still on-going and on completion certain parties included in the policyholders’ and reinsurance balances receivable under note 7 amounting to Saudi Riyals 115.9 million may be identified as receivable from related parties and therefore may need to be disclosed under due from related parties. The underlying transactions with such related parties will then also require disclosure under related party transactions. Accordingly, management is currently unable to provide a complete list of all related parties balances and transactions which impacts both the presentation and disclosure of related party balances and transactions. Consequently, we were unable to determine whether any adjustments to the presentation and disclosure of the related party balances and transactions were necessary in the accompanying interim condensed financial information.

2) As disclosed in note 3, the Company is accounting for its reinsurance transactions related to the general line of business based on their understanding of the contractual terms of the reinsurance agreements. However, such accounting of reinsurance transactions may be subject to different interpretations. As a result, the Company’s interim condensed financial information may require adjustments, if the terms of reinsurance agreements are interpreted differently. Management is still securing clarity on the terms of the reinsurance agreements. In the absence of information in this regard, we were unable to determine whether adjustments would be required in the accompanying interim condensed financial information.

QUALIFIED CONCLUSION

Based on our review, except for the possible effects of the matters described in the Basis for Qualified Conclusion paragraphs, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial information is not prepared, in all material respects, in accordance with IAS 34 as modified by SAMA for the accounting of zakat and income tax.

EMPHASIS OF MATTERS

Without further qualifying our conclusion, we draw attention to note 2 to the accompanying financial statements, which details various communications from SAMA to the Company. The Company did not meet the solvency margin requirements as at 31 March 2019. The deficiency in solvency margin along with other matters as set forth in note 2 indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. However, the accompanying interim condensed financial information are prepared using the going-concern assumption since during the year 2018 the Company had successfully issued SAR 400 million in right shares improving the interim condensed financial position of the Company and based on management’s assessment on the company abilities to continue as a going concern.

Reclassifications in quarter financial result We reclassified some comparative numbers within the previous period interim condensed financial information in order to comply with the current period, there was no financial impact on net income after the reclassification.
Additional Information The weighted average number of ordinary shares have been adjusted to reflect the increase in the company capital from 40 million to 80 million shares through a right issue at SR 10 per share as approved in the Extra Ordinary General Assembly meeting held on 10 September 2018. Further, comparative periods earnings per share have also been recalculated to reflect the increase in the weighted average number of ordinary shares due to bonus element included in the Right Issue. The EPS for the current period has been calculated by dividing the current period net profit ٍ SR 7,035 thousand by the weighted average number of shares amounting to 80,000 thousand shares. Further the EPS for comparative period has been re-calculated by dividing the comparative period net loss SR 23,272 thousand by the revised weighted average number of shares amounting to 46,877 thousand shares.

The total shareholders` equity (no minority interest) at current period is SR 677,914 thousand compared to SR 473,396 thousand during the same period of the previous year, an increase of 43.2%.

The accumulated losses has reach 269,547 thousand for the period ended 31 March 2019, which consist of 33.69% of the paid capital amounting to 800,000 thousand.

The total insurance operations comprehensive income during the current quarter is 601 thousand comparing to 11 thousand during the same quarter of the previous year, an increase of 5,363.6% and comparing to comprehensive loss of 4,333 thousand during the previous quarter. The total shareholders` comprehensive income during the current quarter is 8,803 thousand compared to comprehensive loss of 23,313 thousand during the same quarter of the previous year, and comparing to comprehensive loss of 92,735 thousand during the previous quarter.

The company has adopted starting 1st January 2019 IFRS (16) Rent Contracts. For more information regarding the impact of implementation kindly refer to note 4 (Change in Accounting Policies) in the interim condensed financial information for the period ended 31 March 2019.

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