National Takaful Company Watania results for year ended 31 December 2016
Watania management has announced the following financial analysis to its stakeholders for the annual statements pertaining to year ended 31 December 2016.
Gross contribution written:
Following 2015 where the Company incurred significant losses, the board and management implemented changes to the organisational structure with a renewed focus on profitability, adopting a ‘back-to-basics’ approach towards Takaful solutions at the right price. Good and consistent claims service and a tighter control on costs. While this resulted in lower gross revenue, there was a significant increase in underwriting surplus.
The Company’s gross contribution during 2016 stood at AED 200.2 million, down from AED 209.4 million in 2015. During the first half of 2016 top line was down 35 per cent compared to the same period the the previous year, owing to the pruning of loss making motor and medical accounts.
Through focused segmentation strategy driven by a new pricing approach, improved service levels and a widening of distribution channels, the second half of 2016 saw a 112 per cent reported growth.
The retention ratio of 2016 stood at 65 per cent, up from 52 per cent in 2015, driven by focussing on the segments that allowed the Company to maintain higher retained line, such as motor, medical and SME industries.
Takaful operations results:
The Company registered a net Takaful income of AED 21 million for 2016 compared to a net Takaful loss of AED 17.2 million in 2015. A segmentation strategy to adjust the prices for profitable and non-profitable segments was implemented, while the customer-service platform was enhanced which saw a significant underwriting surplus in Motor. All the Company’s product lines saw an increase in underwriting income for the year.
Watania’s net loss from Takaful operations for 2016 was AED 14.1 million, an improvement from the AED 49.6 million loss in 2015. The overall net loss ratio was 64 per cent compared to the net loss ratio of 102 per cent in the previous year.
The Company’s technical provisions are fully compliant with the UAE Insurance Authority regulations.
General and administrative expenses:
The Company’s expenses for 2016 were AED 29.4 million compared to AED 30.9 million in 2015. Doubtful debt provisions were strengthened by AED 1 million in 2016, reflected within generl administrative expenses. The Company will continue to explore ways to leverage the resource base of Al Madina Takaful through a shared services structure to reduce operating expenses.
Net investment income:
The regional investment climate was volatile in 2016, starting with a drop in asset prices, particularly equities and Sukuk on the back of falling oil prices. The end of Q1 and start of Q2 saw saw a decent recovery followed by stability till the end of Q3 in 2016. Increased interest rates in Q4 impacted the Sukuk prices negatively.
In spite of its challenges, the company generated a total net investment income of AED 7.5 million in 2016, up from AED 5.6 million in 2015. Although the investment market is likely to remain volatile throughout 2017, it is likely that some positive impact of recovery in oil prices will be felt in capital markets and the Company will continue to diversify its investment book further to help achieve stable investment returns.
The Company made a net profit of AED 0.4 million in 2016, a remarkable turnaround from 2015’s AED 41.4 million loss.
Total assets at the end of 2016 amounted to AED 322.9 million against 2015’s AED 356.5 million.
Cash and cash equivalents, including restricted bank deposits were at AED 92.2 million in 2016, compared to AED 55.2 million in 2015.
|Takaful contract liabilities at 2016’s year-end reached AED 174.6 million, down from AED 182.8 million in 2015.
Shareholder equity amounted to AED 79.2 million in 2016, down from AED 80 million in 2015.
Basic earnings per share for 2016 remained at AED0.002 against a lost per share of AED 0.28 in 2015.
It is likely that 2017 will be another challenging year due to global pressures on the economy and the country’s continued efforts to reduce budget deficits. The Company is optimistic about its growth prospects in terms of gross revenue and profitability on the back of 2016’s efforts, including maintaining its ‘back-to-basics’ strategy implemented last year.