Qatar Insurance Company (QIC) has revealed that its net underwriting income declined by 40% in the first-half of 2017 when compared with the previous year, which the firm says was driven by large losses and the UK government’s decision to lower the Ogden Discount Rate to -0.75%.
QIC Group’s net underwriting result declined from $120 million in the first six months of 2016, to $72 million in the first-half of this year, a reduction of 40% year-on-year as the firm responded to the Ogden rate cut and a “few large risk losses” within its international operations.
“The half-year performance was materially affected by the UK Government’s decision to drastically cut the Ogden Discount Rate, which shook up the UK motor insurance market, with an expected industry-wide reserving hit of over USD 10 billion,” explains QIC Group in its H1 2017 earnings release.
The re/insurer has a strong underwriting presence in the UK and as a result of the Ogden rate cut decided to boost its motor reserves by $31 million, which, combined with large losses and ultimately hindered the firm’s H1 2017 underwriting performance.
QIC Group’s non-life combined ratio weakened from 96.9% as at the end of June 2016, to 101.5% in H1 2017.
The Qatar, Middle East and North African (MENA) focused re/insurer is the latest in a number of companies that have either reported actual, or expected impacts to performance from the Ogden rate cut, which was reduced from 2.5% to -0.75% in early 2017.
This, combined with a few large losses has reduced QIC Group’s underwriting performance by almost half, underlining that during the softening, highly competitive and pressured re/insurance marketplace, firms are susceptible to lower returns, and combined ratios above the 100% profitability threshold.
QIC Group actually grew its gross written premiums (GWP) in the period by 14% to $1.714 billion, compared with $1.506 billion a year earlier. While net written premiums (NWP) increased to $1.369 billion from $1.28 billion, in H1 2016.
The large majority, or 89% of the growth in GWP so far in 2017, according to QIC Group, came from its Qatar Re reinsurance subsidiary, Antares, its London-based specialty insurer and QIC Europe Limited, the firm’s Malta-based subsidiary.
The Group says that as at June 30th, 2017, Qatar Re, Antares, and QIC Europe Limited accounted for 71% of its total premium volume, which is up from the 69% reported a year earlier.
Group President and Chief Executive Officer (CEO) of QIC Group, Khalifa Abdulla Turki Al Subaey, commented; “The financial results for the first half-year of 2017 clearly demonstrate the effectiveness of QIC Group’s diversification strategy which is predicated on tapping into global growth opportunities whilst maintaining our leading position in our home markets. With minimal exposure in the countries involved in a diplomatic rift with Qatar, it is business as usual for us.”
In light of “a politically driven investment and ultra-soft underwriting environment,” the re/insurer saw its net profit fall to $139 million in H1 2017, a reduction of almost 16% when compared to the $165 million recorded a year earlier.
The re/insurer also managed to increase its investment income in the period, despite persistent economic and political headwinds. QIC Group increased its investment income from $132 million in the first six months of 2016, to $155 million in H1 2017.
Looking forward, Al Subaey, said; “In line with our business objectives, we will continue to adapt to the changing environment and renew our focus on a bottom line driven sustainable growth strategy for QIC Group.”