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The Mediterranean and Gulf Insurance and Reinsurance Co. announces its Interim Financial Results for the Period Ending on 2019-06-30 ( Six Months )

MEDGULF 8030 80.45% 24.00 10.70
Element List Current Quarter Similar quarter for previous year %Change Previous Quarter % Change
Gross Written Premiums (GWP) 290,458 277,863 4.532 1,077,243 -73.036
Net Written Premiums (NWP) 205,487 244,774 -16.05 683,057 -69.916
Net Incurred Claims 463,913 347,799 33.385 443,097 4.697
Net Profit (Loss) of Policy Holders Investment 5,589 2,217 152.097 4,909 13.852
Profit (Loss) Insurance Operations Minus Policy Holders Investments Revenues (Operations Results) -5,715 -12,576 -54.556 1,103 -
Net Profit (loss) of Shareholders Capital Investment 6,174 3,810 62.047 3,542 74.308
Net Profit (Loss) before Zakat 4,117 -8,634 - 7,035 -41.478
Total Comprehensive Income 4,028 -10,496 - 5,750 -29.947
All figures are in (Thousands) Saudi Arabia, Riyals
Element List Current Period Similar period for previous year %Change
Gross Written Premiums (GWP) 1,367,701 691,479 97.793
Net Written Premiums (NWP) 888,544 593,523 49.706
Net Incurred Claims 907,010 768,433 18.033
Net Profit (Loss) of Policy Holders Investment 10,558 5,370 96.61
Profit (Loss) Insurance Operations Minus Policy Holders Investments Revenues (Operations Results) -4,672 -38,641 -87.909
Net Profit (loss) of Shareholders Capital Investment 9,715 4,421 119.746
Net Profit (Loss) before Zakat 11,164 -31,908 -
Total Comprehensive Income 8,749 -35,238 -
Total Share Holders Equity (after Deducting Minority Equity) 694,836 462,474 50.243
Profit (Loss) per Share 0.05 -0.74
All figures are in (Thousands) Saudi Arabia, Riyals
Accumulated Losses Capital Percentage %
-255,815 800,000 -31.98
All figures are in (Thousands) Saudi Arabia, Riyals
Element List Explanation
Increase (Decrease) in Net Profit for Current Quarter Compared to the Same Quarter of the Previous Year is Attributed to 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 37.9% due to the increase in net earned premium by 24.5%.

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 62.0%.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to The reason behind the decrease in net profit during the current quarter compared to the previous quarter is the decrease in net underwriting result by 5.1% due to the increase in net claims incurred by 4.7%.

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

Increase (Decrease) in Net Profit for Current Period Compared to the Same Period of the Previous Year is Attributed to The reason behind the net profit during the current period compared to net loss during the same period of the previous year is the increase in net underwriting result by 49.9%, due to the increase in net earned premium by 14.3% mainly due to the increase in business.

The reason behind the increase in shareholders investments income during the current period compared to the same period of the previous year is the increase in special commission income by 119.7%.

Basis of the External Auditor's Opinion Qualified opinion
Modification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion 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 115.3 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 endorsed in the Kingdom of Saudi Arabia.

EMPHASIS OF MATTER

We draw attention to note 2 to the accompanying interim condensed financial information, which details various communications from SAMA to the Company. The Company did not meet the solvency margin requirements as at 30 June 2019. The deficiency in solvency margin 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 400 million in rights shares improving the Company’s financial position and based on management’s assessment on Company’s ability to continue as a going-concern. Our conclusion is not further modified with respect to this matter.

Reclassification of Comparison Items 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 before zakat and income tax after the reclassification.

Starting from the quarter ended 30 June 2019, Zakat and tax are to be accrued on a quarterly basis and recognized in consolidated statement of income with a corresponding liability recognized in the consolidated statement of financial position in accordance with International Financial Reporting Standard (IFRS) and other standards and pronouncements endorsed by SOCPA.

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 after zakat and income tax, SR 3,791 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 after zakat and income tax SR 34,838 thousand by the revised weighted average number of shares amounting to 46,800 thousand shares.

The EPS for the current period is 0.05 comparing to loss per share of 0.74 during the same period of the previous year.

The total shareholders` equity (no minority interest) at current period is SR 694,836 thousand compared to SR 462,474 thousand during the same period of the previous year, an increase of 50.2%.

The accumulated losses has reach 255,815 thousand for the period ended 30 June 2019, which consist of 31.98% of the paid capital amounting to 800,000 thousand.

The net income after zakat and income tax during the current quarter is 838 thousand comparing to net loss after zakat and income tax 10,137 thousand during the same quarter of the previous year, and comparing to 3,982 thousand during the previous quarter, a decrease of 78.9%.

The net income after zakat and income tax during the current period is 3,791 thousand comparing to net loss after zakat and income tax 34,838 thousand during the same period of the previous year.

The total insurance operations comprehensive income during the current quarter is nil comparing to 10 thousand during the same quarter of the previous year, and comparing 601 thousand during the previous quarter. The total shareholders` comprehensive income during the current quarter is 4,028 thousand compared to comprehensive loss of 10,496 thousand during the same quarter of the previous year, and comparing to comprehensive income of 5,750 thousand during the previous quarter, a decrease of 29.9%.

The total insurance operations comprehensive income during the current period is 589 thousand comparing to 21 thousand during the same period of the previous year, an increase of 2,704.8%. The total shareholders` comprehensive income during the current period is 8,749 thousand comparing to comprehensive loss 35,238 thousand during the same period of the previous year.

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 30 June 2019.

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