Saudi insurance sector facing uncertainties
Thursday, 02 15 2018, Category: Insurance and Reinsurance, Country: Saudi Arabia
Al Rajhi Capital Research believes growth rates for the Saudi insurance sector would be at the best tepid or negative in the short to medium term as there are other challenges offsetting these benefits.
This is mainly in the form of no-claim or loyalty discounts, higher competition for motor and down trading in health segment.
Although changes such as compulsory insurance for nationals in private companies, stricter implementation of third party motor insurance, allowing women to drive, higher private employment and public health insurance, are all positive, the potential could be inflated and growth delayed, the research firm said in a report issued on Wednesday.
Saudi insurance index declined by 10% since the third quarter of 2017, however, insurance companies trade at higher PE multiples than Saudi banks, the report stated.
Past data of insurance companies shows inconsistency in dividend pay-out, high sensitivity to insurance premium prices, regulatory uncertainties and impact from Fed hikes relative to Saudi Banks, given large investment book in fixed income assets.