The Bahrain-based Arab Reinsurance Group (Arig) reported a 71% year-on-year decrease in net profits by the midpoint of FY 2016. It returned only US$1.8m compared to US$6.2m for the same period last year.
For the second quarter of 2016 alone, the net profit was only US$1m, while 2Q 2015 had US$2.7m.
In spite of a 10.8% increase in gross premium income, profits still fell due to unsatisfactory insurance pricing, decreased investment income, and large losses from the company’s regional clients.
The rise in premiums was attributed to involvement in the Lloyd’s market, but losses from the GCC markets hurt underwriting returns. The group’s underwriting results were US$3.8m, compared to US$9.1m from last year. The takaful subsidiary made a meagre midyear profit of US$0.2m, compared to US$0.7m for 2015.
The group, which was founded by the governments of Kuwait, the UAE, and Libya, had a combined loss ratio of 69% for the first two quarters of the year. Meanwhile, the combined ratio improved to 87.2% from 90.2% last year, due to savings from the company’s operations.
Book value per share was at US$1.27 at midyear 2016, higher by US$0.04 than midyear 2015.
Yassir Albaharna, CEO of Arig, commented: "These are challenging times for our industry, especially regional reinsurers. We see some positive signs as regulators have started to focus on sustainable market practices. But we still have a long way to go and the global policy of cheap capital is not helping us."
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