Dar Al Takaful swings to second quarter loss on higher operating expenses

Company explores future growth opportunities, including possibility of expanding outside UAE

Dar Al Takaful began trading on the Dubai Financial Market after its merger with Watania. Photo: DAT

Sharia-compliant insurers Dar Al Takaful swung to a second-quarter loss due to higher operating expenses from one-off merger transaction costs and rising inflation.

The loss for the period attributable to shareholders in the three months ending June 30 was Dh16 million ($4.4m), compared to a profit of Dh7.1m in the second quarter of 2021, the company said in a statement to the Dubai Financial Market.

Net loss for the first six months of the year reached Dh10.3m, from a profit of Dh14.3m in the prior-year period, due to the impact of the Covid-19 pandemic, pricing pressures, investment losses in the second quarter and one-off merger related expenses, the company said.

“While we continued to address the lingering impacts of the Covid-19 pandemic and the significant headwinds resulting from rising inflation and interest rates globally, we have successfully implemented proactive measures and precautions to rebalance our portfolio and limit outsized exposure,” said chairman Ali Saeed Bin Harmal Aldhaheri.

Last month, DAT and National Takaful Company, better known as Watania, completed their merger to create the UAE's largest insurance provider after securing the approval of regulatory authorities and shareholders of the two companies.

The merged company, Dar Al Takaful, began trading on the Dubai Financial Market with a share capital of Dh260m under the ticker “DARTAKAFUL” on July 4.

“Through the merger between DAT and Watania, the new combined entity DAT PJSC is well positioned to benefit from the potential realisation of significant cost and revenue synergies, as well as reduced operating expenses and better IT platforms,” Mr Aldhaheri said.

“In addition, risk will be diversified across a larger policyholder base and product portfolio, thereby reducing exposure to single events.”

Gross written contributions were down marginally by 4.4 per cent to Dh401.4m in the first six months of 2022, from Dh420m in the first half of 2021, with the aggressive deleveraging and derisking measures the company implemented.

The company said it was already seeing the positive outcomes of these turnaround measures with the Family and Individual Family insurance segments delivering robust results, and the medical insurance segment growing steadily by 9 per cent.

“Our larger scale as one of the leading Takaful providers in a highly fragmented market will help us better manage risk, expand geographic reach, as well as generate sustainable returns and create value for our shareholders and key stakeholders,” Mr Aldhaheri said.

Following the merger, the company is exploring future growth opportunities, including the possibility to grow its footprint outside its UAE market.

“With a substantially larger balance sheet exceeding Dh2 billion in total assets, we can develop new and innovative products to meet the evolving needs of Takaful customers while maintaining long term competitive edge in the market and supporting our drive to benefit from future growth opportunities including exploring possibilities to expand beyond the UAE,” he said.

The company is also bullish on the industry growth as the UAE economy continues to recover strongly from the impact of the pandemic.

“As the economy has rebounded in response to positive government actions, this will have a positive flow on effect on the various business sectors including the broader insurance and Takaful industry,” Mr Aldhaheri said.