Oman Insurance Company (OIC) has formulated a three-year strategy aimed at boosting profitability and growing premiums at a compound annual growth rate (CAGR) of 11 per cent despite fierce competition in the market.
“Our expectation is that we can keep growing at a rate of 10 to 11 CAGR [in premiums] over the coming three years even if the market grows at a lesser rate,” said Christos Adamantiadis, the chief executive.
“We believe that we can grow [profit] at a significant and faster rate than our top line growth.”
The Dubai-listed insurer plans to focus on new segments of insurance, improve its services, increase awareness about health and boost its online business and sales as part of this new strategy.
“We are investing heavily in analytics and data mining that will allow us to focus on the segments that provide the highest return and that have the highest opportunity to grow our profitability over the coming three years,” said Mr Adamantiadis, who was appointed chief executive in May from AIG in London.
For example, in the medical space the company plans to focus more on the small and medium segment, which has had better performance than the big accounts segment.
“What we want to do is create or establish a healthcare and wellness strategy in cooperation with some of our key clients that will have a number of objectives, including to increase the health literacy of the population that we insure and to give them incentives to live a healthier lifestyle,” said Mr Adamantiadis.
Last year, the company exited some loss-making medical accounts and revisited the auto segment, affecting its underwriting income. The insurer’s third quarter net profit attributable to equity owners dropped 22 per cent to Dh27.4 million last year, from Dh35.2m in the year-earlier period as net underwriting profit plunged 41 per cent.
Underwriting profit last year is expected to be less than in 2014. Investment income is expected to have dropped last year because of prevailing market conditions: a low interest rate environment, volatility in equity markets and a softening property market.
“In the current operating environment, we don’t foresee [in 2016] any major departures from the investment returns we generated last year,” said Mr Adamantiadis. “Underwriting income, we expect to double it between 2015 and 2016.”
The company has adopted a conservative policy in connection with its investment portfolio, where fixed income makes up 41 per cent, equity 20 per cent and property 22 per cent.
OIC’s ambitious new strategy comes at a time when the insurance sector is growing. Gross insurance premiums were expected to have grown 15 per cent to Dh38 billion last year from a year earlier, according to the Insurance Authority.
With 60 companies operating in the market, insurers, however, are suffering from declining premium rates as competition intensifies – particularly for motor and medical insurance.
“There is ample capacity and ample capital in the market that will continue to drive the rates to be lower, which will force the industry as a whole to be more efficient to maintain the profit margins,” said Mr Adamantiadis.
Besides the pressure on rates, new regulations are expected to weed out weaker players.
The Insurance Authority issued new regulations in February last year that place restrictions on how companies can invest their money and how much exposure they can have to any particular asset class.
The rules also require companies to have an independent investment committee and include measures aimed at strengthening corporate governance, compliance and risk management.
“So overall, the environment will become more well-governed but at the same time it will pose some challenges to the industry as a whole and also to some of the less strong players,” said Mr Adamantiadis.
dalsaadi@thenational.ae
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