Arab Insurance Group (Arig) announced on 12 November nine-month 1998 net profits of $720,000. However, this represents a loss in the third quarter of $7.4 million after first-half 1998 profits of $8.1 million were recorded (MEED 28:8:98). The net profit for the same period of 1997 was $30.1 million. A company statement ascribed the weak interim performance to soft reinsurance market conditions and operating losses by its new operations.

'Surplus capacity and lower premium rates witnessed by the reinsurance market generally, together with a higher incidence of claims, particularly within the aviation and property classes of business, led to a decline in the profit contribution from the core reinsurance business,' Arig says. The bottom line was further eroded by the Moroccan subsidiary's losses as a result of its motor and workmen's compensation insurance businesses.

Analysts also attribute shrinking earnings to losses incurred from the recently-established, and initially mispriced, health insurance operation in Saudi Arabia. Research from Nomura suggests that many of the operation's teething problems have been redressed and that it should be profitable by the end of the year.

A more encouraging indication has been the 94 per cent rise in investment income to $69.9 million in the first nine months of 1998, stemming partly from the rise in shareholders' funds to $465 million. Arig also managed to boost its gross premiums by 11 per cent to $269 million. New business operations contributed 33 per cent of gross premiums, compared to just 5 per cent at the same stage last year. Arig says this shows the contribution that its diversification into personal insurance services in the Arab world has made. This should also help to push profits back up, the company says.