Vijay Valecha , Special to Gulf News April 20, 2021
Oman Insurance, a Dh993 million market capitalised company, provides insurance solutions for individuals and enterprises in general, medical and life insurance.
Recently, the company, one of the UAE's leading insurers, was assigned a positive outlook by S&P Global Ratings, based on improved operating performance, while confirming its A- rating. Getting an 'A' from the world's leading credit rating agencies is not a cakewalk, and this acknowledgment from S&P is spectacular.
It is nothing short of a testimony to Oman Insurance Company's market-leading position and superior financial performance. Oman Insurance's solvency margin is now 250 per cent - its highest level in many years and indicating a solid balance-sheet. (According to regulations, the minimum solvency required for an insurer is 100 per cent.)
The company's net premium earned (NPE) at Dh1.63 billion is the highest in the UAE, reflecting its prudent underwriting discipline and risk selection. NPE is income received by insurance companies less the expenses associated with the policy.
Insurance companies generally buy reinsurance policies that help protect them from claims against large and disastrous losses. For Oman Insurance, the high NPE indicates that it was able to maintain its pricing power. It continues to maintain its No. 1 position in the UAE, among more than 30 listed insurers, in terms of net earned premiums. Last year's net profit was at Dh196.5 million, up 3 per cent compared to 2019, making it highest in the past five years.
Net underwriting results increased 2.1 per cent year-on-year to Dh440.9 million despite claims related to COVID-19, floods, and large one-off, nonattritional losses. Net underwriting income is the profit that an insurance company makes from its premiums after various associated expenses. These expenses include claims paid out, policyholder dividends, and loss adjustment expenses.
The insurance company generates a net underwriting income only if the money it receives from premiums is higher than what it pays out in expenses. Here also Oman Insurance performed well, notwithstanding the challenging economic scenario.
On the operational front, a strong accent on collections and credit management reduced net receivables by 2.3 per cent to Dh574.1 million in 2020 compared to Dh587.5 million in 2019, with the receivables ratio among one of the lowest among listed companies in the UAE market. The 'receivable turnover ratio' - or debtor's turnover ratio - helps us understand how effective a company is in extending credit and collecting debts.
So it is not surprising that the S&P has given the company a good rating. S&P said that the outlook revision reflects positive operating performance and an improving capital base over the past two years. The rating agency was impressed with the company's improvement in underwriting and investment income consistently, despite softer economic conditions and recent market volatility.
With a gross written premium of Dh3.59 billion in 2020, the UAE insurer is a good choice for the long-term investor.