Insurers extend slide as concerns persist

Investors show little interest in sector hit by slower economy

The insurance sector continued its retreat as the local share markets ended a week of volatility and more slow trading. Takaful Emarat was the only one of the 28 Islamic and conventional insurers listed on UAE bourses to finish in positive territory yesterday, with the shares of insurers generally on an extended slide. Wadah al Taha, the chief investment officer at Zarooni Group in Dubai, said 13 of the insurers currently trade below their book value. "Investors are not interested in insurance sector at the moment. This is significant. There is hardly any institutional participation and most stocks are taking the hit like they did in the first quarter of 2009," he said.

The declines in UAE properties and equities have been a one-two punch for insurance firms, which were heavily exposed to both sectors. Most companies booked losses last year as portfolio values declined. The bigger companies, such as Abu Dhabi National Insurance Company in the capital and Islamic Arab Insurance (Salama) in Dubai, are more exposed than their smaller peers. Operational weakness is also playing a role in the shares' decline as revenues from property, construction and engineering clients - which had been lucrative sectors - have fallen during the economic downturn.

Among the worst performers yesterday was Methaq Takaful Insurance, which sank 6.8 per cent to Dh1.50, its 52-week low. The stock is down 75 per cent from its high of Dh6.10 in June last year. "It is one of the newer companies, but it has been used by speculators and day traders. The present market price is perhaps in line with the market, but there was no justification of previous highs," Mr al Taha said. Salama shares declined 2.5 per cent to Dh0.72. It is down 48.9 per cent from its 12-month peak and just a notch above its 52-week low of Dh0.71. Dar Al Takaful dropped 2.8 per cent to Dh1.04.