Insurance, investments boost ARIG profits

21 March 1997

Arab Insurance Group (ARIG) has reported a 16 per cent increase in net profits to a record $42.4 million. The Bahrain-based company's insurance and investment activities both performed well during the year, general manager Bader al-Wahidi says. The company's total assets rose by 7 per cent to $887 million in 1996.

The net profit figure represents a 14.8 per cent return on average shareholders' equity. In addition to its insurance and reinsurance businesses, ARIG has an investment portfolio worth about $500 million, most of which is invested in dollar-denominated bonds and about 10 per cent in shares. This latter part helped to boost 1996 profits.

ARIG has been expanding its distribution network across the Middle East. In April of last year, it bought 49 per cent of Egypt's Allied Investors Insurance Company and another affiliate has been set up in Jordan which is due to start business in April. ARIG has also put together a group of investors to set up an insurance company in Lebanon, where it is applying for a licence, as well as looking closely at Morocco. ARIG will own 60 per cent of the Lebanese company.

Wahidi is cautious about the group's immediate prospects. 'This year, we will be worrying a little bit about the insurance side because the market is weakening,' he says. 'We hope to match last year's results but it will be harder.' The company's main areas of effort this year will be in widening its product distribution network through the new subsidiaries and building up the healthcare business it launched last year. 'Healthcare is the area we are really enthusiastic about,' he says.

Demand for private health insurance is being driven in the Gulf by the emerging trend for governments to try and pass on some of the costs of healthcare to consumers, and elsewhere in the Middle East by economic liberalisation, which is creating new groups of potential clients. To date, the healthcare business has written premiums worth about $2 million, and Wahidi expects this figure to increase sharply in 1997.

ARIG, which is owned by the UAE, Libya and Kuwait, is paying dividends totalling $18 million for 1996, compared to $15 million the year before. The company is about to open up its ownership to private investors through a public offering of new shares worth up to $200 million. 'We want to come to the market before summer,' says Wahidi. The banks arranging the offering have said that the shares would be listed in Bahrain, but Wahidi said the plan was to get listings on other exchanges in the region as well. The offering and a transfer of some reserves to capital would increase ARIG's paid-up capital to $400 million from $150 million (MEED 9:8:96).

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