• Global values KIC stock at 384fils and initiates coverage with a ‘HOLD’
Global Investment House - Kuwait Insurance Company (KIC), established in 1960, is the first national company in Kuwait and the first insurance company in the Arabian Gulf States (GCC). It has stood as one of the leaders in the Kuwait insurance industry.
KIC’s portfolio is well spread out across various classes. Apart from the competitive advantages in usual classes like fire, accident, engineering, liabilities, marine, aviation, motor and life, it holds the most prominent position in niche classes like professional indemnity- engineers, architects, lawyers, accountants as well as medical malpractice; besides financial institution risks.
KIC is an undisputed leader amongst the conventional players in non-life business in Kuwait. KIC leads in non-life business outpacing the other conventional players. KIC retains its position at first place by significant difference of premiums of KD2.3mn as compared to other players like Gulf Insurance, Warba Insurance and Al-Ahleia Insurance company in the last three years.
Kuwait Insurance Company is the oldest player in the Kuwait insurance industry. The company has built up strong reserves and brand name over the last five decades. The company has sustained its second position after Gulf Insurance Company in the insurance industry. KIC only has presence in Kuwait but Gulf Insurance is diversified in the GCC region making company as a market leader.
Kuwait Insurance Company (KIC), established in 1960, is the first national company in Kuwait and the first insurance company in the Arabian Gulf States (GCC). It has acted as catalyst to Kuwait insurance industry, to guide and nurture the insurance sector growth and development. The company has been present for five decades in Kuwait and changed the outlook for the insurance market in Kuwait.
KIC’s major asset is the technical skill of its key personnel. They have vast experience in handling major Oil & Energy sectors insurance programme. The employee turnover is negligible, the long association of its key personnel with the company provides unrivalled accumulated experience and expertise.
Financial Performance
Kuwait Insurance Company has reported a two year CAGR 2006-2008 de-growth of 2.9%, 4.9% and 22.1% in gross written premiums, net written premiums and net income. The company has reported de-growth on the gross premiums since the insurance sector has witnessed regulatory changes. In beginning of 2008 the medical insurance underwriting has been assured by the government earlier being underwritten by the insurance companies in Kuwait. Also the underwriting of insurance on credit life has been banned in Kuwait.
Chart 01 : Profitability Analysis
Source : Company Reports, Global Research
The company has reported 49.6% growth in fire segment in 2008 as compared to 2007. The higher growth was despite the weaker macro demand and delay in expansion of projects to capitalize on lower project costs. The falling retention rate from 56.7% in 2006 to 54.4% in 2008 led to de-growth in net premiums written. The company reported lower retention rate owing to most of the large policy premiums accounting for major share of gross premiums share have been mostly reinsured.
The company has reported a two year CAGR decline in net income from 2006-2008. The company witnessed a lower profit due to global financial crisis and meltdown in equity markets it resulted in erosion of equities in available for sale portfolio, the company made provisions of KD1.1mn in 2008 resulting in significant decline in profits.
KIC had more than KD18mn worth investments made locally in Kuwaiti markets i.e. 33.3% of the total KD54mn. The company had invested KD44mn in GCC and overseas markets. The global financial crisis led to deep correction of the equity markets resulting to stock prices trading below fair values and even in some cases below face values. This resulted in writing off the losses and aggressive provisioning for KIC and resulted in lower profits for the company. We believe that this recession has witnessed a deepest correction and it is an exceptional year.
KIC has witnessed a change in premiums mix of the last three years period. The fire segment has seen a rise in contribution from 10% in 2006 to 14% in 2008. The Marine & Aviation has grown from 9% in 2006 to 12% in 2008. The company has not reported growth in other segments infact life segments has reported de-growth due to regulatory changes. Firstly in the beginning of 2008, the medical insurance underwriting is assured by the government. Also underwriting of insurance on credit life has been banned in Kuwait.
The company has seen a shift in premium mix mainly due to changing dynamics of business. The awareness of takaful products introduced by the takaful insurance companies has taken away major premium share from the conventional insurance companies. KIC’s focus on the Fire and General Accident segment has helped the company to retain its market share.
KIC only has presence in Kuwait unlike Gulf Insurance Company having pan-GCC presence. KIC has 11 branches in Kuwait and is in the phase of opening the 12th branch. The company offers takaful products to its clients in need from its own takaful unit. The company has kept its focus on the Kuwait insurance market as there is enough potential left to be untapped.
Chart 02: Liquidity Ratios
Source : Company Reports, Global Research
The liquidity for the company remains intact and is sufficient to cushion any downside in the business. KIC’s presence in the business more than five decades has helped the company to build up its networth. The company has taken steps to reduce its investments from 60% in 2007 to 49% in 2008 as a percentage to total assets.
