Q2 2026 Company for Cooperative Insurance SJSC Earnings Call
Speaker #1: Into the chat box. Into the Q&A box. Please note that at Tawuniya's request, a brief survey will be available at the end of the call.
Speaker #1: We'd appreciate your feedback on today's presentation and discussion. I'll now hand over to Abdullah Rahman Al-Yami, Head of Investor Relations to begin today's presentation.
Speaker #1: Please go ahead.
Speaker #2: Thank you, Sami, and good day, ladies and gentlemen, and welcome to Tawuniya's second quarter earning call. As usual, with me on the call today, our CEO, Dr. Othman Al-Qassabi, and Mohamed Hindi, our Finance Senior Executive Director.
Speaker #2: As the usual format, our CEO will start by a strategy recap, followed by a business review on the different line of businesses. Then that will be followed by financial overview and highlights by Mohamed Hindi.
Speaker #2: Without any further ado, I will hand it over to our CEO, Dr. Othman. Over to you.
Speaker #3: Assalamu alaikum, and good afternoon, ladies and gentlemen. We're delighted to have you here with us, and this earning call I hope that we will be able to shed some light and give some color over our results so far.
Speaker #3: Just to, you know, keep reminding you about our 2030 strategy, as we've explained it before, you know, we are kind of excited to execute the strategic horizon, based on three pillars: ensure of choice, more than being more than an insurer, and being more the most agile and scalable insurer.
Speaker #3: Based on three strategic enabler: lean operating model, deliver business-class customer experience, and the technology infrastructure for AI use. So let's go to the highlights.
Speaker #3: Alhamdulillah, the H1 results show growth is strong, and it's brought, you know, around all the lines of business. The profit decline is very specific, and it's been identified and already being priced against.
Speaker #3: If you look into the figures, you can see that the there's massive growth when we look at the 20% in the insurance revenue, 16% when you look at the revenues versus the sales, and between new and renewals, you know, are kind of similar.
Speaker #3: The profitability is probably lower than the same period last year, and this is very specific and identified for motive policies, two motive policies, which, you know, we decided not to renew, and these are two legacy policies for from last year.
Speaker #3: And generally, where we had an exceptional claims largely reinsured, and health remained profitable. However, there's medical inflation that is normalized in Q2, which is something that we have already shared with you, in the last in the last call.
Speaker #3: We will dive into it. However, the reinsurance recoveries are 4.3 billion, and life had a great growth versus same period last year, and investments despite the amount of pressure that we had, we in the market did manage to do 13% improvement versus the same period last year.
Speaker #3: So let's go into the details. You know, medical is very stable, the same story continues with very happy with the way we're running our business through the population health management activities.
Speaker #3: And, you know, if you've managed to compare our health-only numbers in relation to the main competitor in the market, you can see that we've we're managing the our book with at least 1 point better than the main competitor, and of course better than the whole market.
Speaker #3: This is a result of our population health management strategy, MENA is leading the benefit of being a more efficient as we will discuss on their numbers.
Speaker #3: However, the market inflation is, you know, is quite high, still in the two-digit lower two-digit number, and this is mainly driven by frequency. We were expecting a higher seasonality given people traveling, you know, usually and we're seeing lower number of, you know, or lower impact you know, impacted by the situation in the in the region.
Speaker #3: So double click on MENA, massive, massive growth versus the same period last year, utilization has jumped reaching almost 70%, and the satisfaction is under 90% versus the surveys that are done by a third party which is known in the healthcare physicians also has has improved and expanded, and we are still on the growth trajectory and the synchronization between MENA and the health insurance is, Alhamdulillah, going according to the plan.
Speaker #3: And we believe that it's going to be having a better impact as MENA scales. Going to the mobility, the growth is massive, and we're seeing a finally a great loss ratios versus the last 24 months in the two years and a half, the market were suffering on the TP side now we're seeing it normalizing, more toward the right trajectory, our comprehensive book is also you know leaving great profitability.
Speaker #3: However, as I mentioned, there's two big legacy contracts that has comprehensive NTB, we you know, we're suffering a higher pressure on the cost giving the frequency is higher than the usual, and that in those two policies, and the severity of the accidents in those two policies are higher than expected.
Speaker #3: The good thing is it's been identified. We've run a lot of stress tests on the book to see if this is a systematic issue versus a specific risk-related one, and we are very happy to confirm that our, you know, analysis confirms that it is the two policies' lone experience. And I think later on Mohammed will take you through the impact on Q1 and Q2, where we're seeing the impact is reducing as the policies mature and expire by the end of this year.
Speaker #3: P&C, the superstar of this year, we're having a you know, and I would like to take a few minutes explaining what's what's happening in the P&C, P&C is impacted in two ways.
Speaker #3: The first is the change on the book, as you know, we used to have to have 30% of our book revenues comes from engineering projects, which is less year over year by 209% due to the rephasing of the of the GAGA projects.
Speaker #3: And also a reduction in the energy projects. However, as you can see that we're compensating by you know, alternative growth in the general accidents and also around the marine and the property.
Speaker #3: Retail is also leaving great profit expansion, and growth, we and this is the first impact. The second impact is the large claims that we had, we had around 3.8 billion worth of claims.
Speaker #3: However, our retention is 1.8% out of those of this kind of claim, and this is the benefit of our well-structured reinsurance program. And even, you know, on whatever we retain, we have another reinsurance coverage that prevents the volatility of that line of business.
Speaker #3: As you understand that we are increasing the retention in some of the risks, following the National Insurance Strategy. However, we're doing that on a calculated manner and with well-protected reinsurance program.
Speaker #3: Mohammed will share the light explaining that later on in the financials, just to let you you know, to let me know how would that you know, be being translated into our P&L.
Speaker #3: Finally, the scaling of the P&S is great year over year, coming from a low base. We were expecting a higher growth by our integration with some of the big banks.
Speaker #3: However, due to some technical or technology issue, the this kind of growth is going to be inshallah deferred toward next year. However, we believe P&S is the area that is going to be growing even in the market in a in a massive way, and we are very much optimistic about it.
Speaker #3: So I hope I said you know, some color over the the business updates. I'll hand it over to Mohammed to start talking about the boarding part of the presentation.
Speaker #1: All right. Thank you, Dr. Othman, and I would like to welcome everyone to the earning call. As usual, I'll walk you through the financial highlights and financial performance and overall company level, as well as the line of business performance.
Speaker #1: So, as a continuation of what was explained by Dr. Othman, our top line continues to grow positively. Revenue growth is 16%, reaching 12 billion, which is a reflection of the growth that we attained in our top line, our GWP.
Speaker #1: When it comes to net insurance results, yes, we had a dip, maybe the main decline happening in our net profit is due to the net insurance result decline by 15%.
Speaker #1: If we isolate it by line of business, around 75 compared to last year—75 million decline in the general line of business—due to the significant claims that rose during either Q1 or Q2, and our retention rate out of those claims.
Speaker #1: This led to our insurance margin dropping by 2 percentage points. On the other hand, our investment income increased by 13%, closing at 416 million, which continues to be one of the streams that supports the bottom line in case of any volatility that happens in insurance.
Speaker #1: As a result of the insurance results and the margin decline combined ratio, picked up by 2.2% points, our ECL still a release of 57 million, but compared to last year, it's dropped by 27%, but still a positive outcome when it comes to the collection efforts that we've undertaken since the last year or so.
Speaker #1: Our operating expense increased by 22%, and once we go to the waterfall slide, I will explain as well what what led to that increase.
Speaker #1: All in all, we closed net profit that is attributable to shareholder on 610 million, decline of 16% compared to same period last year. So looking at the movement, when it comes to top line, all lines of business generated positive outcome.
Speaker #1: Health grew by 17%, mobility 14%, general also compared to same period as last year, 7%. This is also related to the business written in the last quarters or I would say 12 months.
Speaker #1: All in all, 16% top line growth. The decline in net insurance result of 15% is is associated with most lines of business, but considering that this does not take into account the insurance finance income expense, so a movement from 662 million same period last year to 649 million this year, we see that most of the impact coming from general due to the significant claims, as well the mobility line of business due to the corporate account that was highlighted by the CEO.
Speaker #1: And once I go to each line of business slide, this is where we club together the performance and the impact of the insurance finance expense—that is, taking into account the discounting impact of the claims.
Speaker #1: So as a movement of net income, as highlighted, most of the dip coming from the insurance results. Then investment income supported our bottom line by 48 million, we continue to expand on non-insurance activities related to cash clients of Mina and the mobility ecosystem as well.
Speaker #1: ECL compared to last year, although positive, but it's a decline compared to same period last year. Insurance finance expense, this is where we gained around 27 million.
Speaker #1: Finance charge, which is associated with the facility for Riyadh Re, so this is the the charge taken for that loan. And when it comes to operating expense, an expansion by 74 million, which is associated with the ongoing ramping up of our subsidiaries and the growth of of the business itself.
Speaker #1: So we we aim to continue our expansion and support to the subsidiaries since it's yielding the value that we see, for example, in our health line of business.
Speaker #1: Considering the inflation, considering the pickup in average claim cost, without that support that came in from Mina of plus 300 million of revenues that were internalized as claims in Tawuniya, we wouldn't have the same results that we witnessed for this period.
Speaker #1: When it comes to other income, 21 million increase, it's related to IDI management fees and one-off gains to some of lease terminations. All in all, decline by 16%, and in the next slides I will go by each line of business.
Speaker #1: So the health line of business continues to grow positively when it comes to top line, 17% growth reaching 9 billion of revenues. Insurance expense grew at a higher pace, 20% increase, that led to expense ratio to increase by 2.1% points and combined ratio to by 0.9% point.
Speaker #1: If you look at the right-hand side, this is the movement where I say we have to consider that overall insurance result, or financial result, for health grew by 4%, unlike the previous slide where it excludes the insurance finance expense.
Speaker #1: So this is the discounting that we took into claim due to time value of money, and then you unwind that discount, depending on the interest rate that we assume in the calculation.
Speaker #1: So all in all, health managed to perform 4% improvement from 575 million to almost closing at 600 million. And as we mentioned in the first quarter, we we know that the seasonality impact will kick in.
Speaker #1: So if you see that small chart at the bottom right-hand side, Q1 generated 377 million, while Q2 generated 220 million. This is due to the seasonality shift that we explained before.
Speaker #1: And we saw it coming. So all in all, health still stable continuing to grow, whether when it comes to top line or bottom line.
Speaker #1: When we go to motor, let me maybe walk you through the numbers, and then we'll explain the profitability and what happened there.
Speaker #1: Revenue continued to grow 14% growth. Now, if we look at the performance of every segment or product within motor, so retail segment, which has both products of comprehensive TPL, is performing very well.
Speaker #1: Auto lease is performing very well. When it comes to the corporate segment due to the impact of those two corporate accounts, it kind of tracked down the whole portfolio for for motor.
Speaker #1: Now, with the pricing that we saw as an increase and the improvement that we saw even in TPL, if based on our understanding, the average prices of TPL even moved from 700 per policy to almost above 1,000.
Speaker #1: So that's why in the previous slide explained by CEO, you saw that we increased our exposure to TPL because we believe it's going to the right place when it comes to pricing.
Speaker #1: So this is part of the actions we're taking internally to ensure that we can mitigate the impact of those two corporate accounts. And if you look at the right-hand side, the movement of profitability for motor from a loss of 3 million last year to almost a loss of 36 million, if we look at Q1 versus Q2, 20 million loss of Q1, it became 16 million in Q2.
Speaker #1: This is due to the actions that we're trying to take when it comes to correcting the performance of those two policies, as well as the improvement of the overall retail, whether it's in TPL or comprehensive.
Speaker #1: General now, as as explained by CEO, despite those exceptional claims, general still remained profitable. Yes, it's it's a large dip compared to same period last year, but this is can be validate validates our reinsurance structure and the reinsurance panel that we have that mitigated big proportion, I would say, from from the last claim that we witnessed in the whether Q1 or Q2.
Speaker #1: Most of the cases that we've seen are related to climate-related incidents that took place in Q4 and flowed into Q1, or in Q1 and flowed into Q2.
Speaker #1: Now, based on on the weather conditions here in Saudi throughout Q2, we did not see any severe weather conditions. On top of other claims that are large in magnitude, but highly reinsured of almost 99.9 99 99%.
Speaker #1: So only retention is 0.1% when it comes to the general line of business. That led to our decline from 107 million to 47 million for the first half.
Speaker #1: And if we look at some of those cases, net impact out of a total 3.8 billion gross claims that we received, around 70 million is the assumed impact in Tawuniya portfolio.
Speaker #1: So again, a validation of the reinsurance structure and panels that we have—that allows us to navigate through these difficult periods—as well as the continuation of our efforts. We're also looking into some of the initiatives that we've undertaken to increase retention in certain areas.
Speaker #1: This is the new norm, I would say, in in the area or region. So we have to be cautiously looking into where we retain risks and where we can minimize our exposure going forward.
Speaker #1: Lastly, on investment performance, overall portfolio grew by 11%, and you can see the breakdown. So increase of term deposits and and and other areas as well.
Speaker #1: Investment income overall improved by 13% with an investment return improving by 0.2% point. All in all, portfolio expansion managed to improve our profitability and support the growth of our investment income.
Speaker #1: I believe since based on what I'm just maybe to summarize, this what happened during H1 2026 is cause-driven it's not structural. 75 million impact of general due to those weather conditions and other claims as well.
Speaker #1: 33 million we believe it's related to the run we're sure that it's related to runoff portfolio of motor and it's within our hand to correct and and improve the performance.
Speaker #1: Our under underlying quality of of the overall portfolio has been improving. Our balance sheet is is resilient. We managed to accommodate for all those large liabilities that we've witnessed.
Speaker #1: Only 1.8% retained loss into our portfolio. Our net assets grew by 6%. Our investment portfolio grew with the income as well. The fundamental of our business remains strong.
Speaker #1: Our premium is increasing by 22%. Our and price correction has taken place in the last periods. Our price adjustments as well in Q4, Q1 as well.
Speaker #1: This will progressively flow into our air premium as we progress in upcoming quarter. So as management, we're we're addressing the impact that happened and we're working together to ensure that we can deliver solid results by year end.
Speaker #1: With that, with open the floor to Q&A and hand it over to our host.
Speaker #2: Thank you very much. Good luck. To ask a question and if you've joined the call via Zoom, please press the raise hand icon on your screen.
Speaker #2: Alternatively, you can use the Q&A chat box to submit a test question. Our first question. We'll come from Rajay Adel. From Jeffrey's. Your line is open.
Speaker #2: Please go ahead.
Speaker #3: Thank you very much, gentlemen, for the thorough presentation. I have a few questions if I may. My first question is on PNC and we have seen few incidents which took place in Saudi Arabia, be it in Yen Port, Jazan, sign pipeline infrastructure as well in the month of July.
Speaker #3: Have you been notified of any incident amongst your PNC customers and should we be concerned about further PNC claims going into the third quarter of the year?
Speaker #3: My second question is on medical GWP growth. It's been quite strong, particularly in Q2. We are looking at a 21% year-on-year growth in the first half.
Speaker #3: Should we expect this momentum to carry forward in the second half, with similar growth and similar strength? And then my third and last is on motor losses.
Speaker #3: You you've highlighted in a detailed manner that you've addressed the couple of legacy corporate accounts and they have been terminated. I just want to get a sense, are you going to now pivot more towards retail?
Speaker #3: Should we expect any potential margin repair before the end of the year? And also, your policy acquisition cost ratio in this business is quite elevated.
Speaker #3: So a pivot to retail would also help. Thank you very much.
Speaker #1: So I was you know, pleasure talking to you, Raj. I'm you know, will I'll address the points quickly. Any claim you know, if any, would have a very low retention you know, ratio.
Speaker #1: So net net impact will not be significant to our book. And so this is for the first question. When it comes to the GWP, yes, as as the what we're seeing will continue inshallah we're very optimistic about the market trajectory.
Speaker #1: You know, so far we like what we see. And we are we're happier with with the growth and inshallah this growth is with good quality.
Speaker #1: Once the impact of the current bad risk will will resolve towards the end of the year, you will see the that you can really good value going forward.
Speaker #1: When it comes to the to the mobility or the the motor, these contracts are you know, quite unique. So we will be assessing all the opportunities.
Speaker #1: However, we think the retail mobility is is very attractive now given the the unit economics and and and and and the TP and and the comprehensive.
Speaker #1: And the policy acquisition cost is usually relative to the channel that we sell in. So the higher the the commissions usually the more profitable is the is the business that we acquire because we we kind of build this commissions based on a certain profitability kickers.
Speaker #1: I hope I addressed your three points.
Speaker #3: If I may just follow up on the PNC, if you could share with us whether you've been notified of any incident that could be supportive because these numbers tend to be quite I would say significant in magnitude and they could you know, derail our forecast for Q3.
Speaker #3: And on the medical if you could give us just a sense of how much pricing increase you're passing on for us to gauge the volume growth achieved so far.
Speaker #1: Yeah. So for again for for any announced you know, claim you will hear about especially for these big claims there will they will have no significant impact on on the PNL.
Speaker #1: So you know, from an financial impact point of view we're so sure that it is well covered. Because these kind of risk are very well protected in we we follow a very disciplined way of protecting it through reinsurance.
Speaker #1: So it will have very low impact if if if any. For the for the medical the average average increases high toward 15 to 18%.
Speaker #1: So this is an average across the whole book. We we really like the the the quality of the of the of the GWP we wrote and it it has a double impact we have a double impact by being very efficient on the claims.
Speaker #1: And this is very evident if you compare compares to the market you can see that the difference despite the you know, the different size that we have and the different mix that we have.
Speaker #3: Very very helpful. Thank you so much, Dr. Osman. Thank you.
Speaker #2: Our next question. From HSBC. Your line is open. Please go ahead.
Speaker #4: Yeah. Thank you for the presentation. I mean, my questions are also around the PNC segment, right? So if you can quantify what percentage of the claims actually came from weather related or what percentage of the net profit reduction was because of the weather related situation from the first quarter in the second quarter.
Speaker #4: That would be really helpful. If you can give a broad range that also would help.
Speaker #1: Yeah. It is maybe more than 90% weather related. So that's why that's why we're very confident these are knowing that there is no raining season in Saudi so far.
Speaker #1: So these are these you know, kind of significantly impactful claims. To our PNL given the retention ratio will not be inshallah happening in in in H2.
Speaker #4: Okay. And regarding those two corporate accounts, right, you you've taken corrective action but should we expect some impact still in the third and the fourth quarter and maybe a one-year cycle when actually things get adjusted?
Speaker #1: Yeah.
Speaker #4: Or yeah.
Speaker #1: Yeah. The majority of the impact has been already touched the the PNL and we have also increases the increased the loss component to those accounts to protect the balance sheet.
Speaker #1: And the good thing is that you know, it's fading away as the they they were issued in December last year. So inshallah up to this December it will be resolved 100% and you will see the impact.
Speaker #1: And as Mohammed explained, Q Q1 had the highest impact and then you know, as we go you will see that impact is you know, reducing.
Speaker #1: And the earned premium as we go forward given the quality of the GWP that we wrote in on the profitable segments will you know, bounce back toward better profitability.
Speaker #1: So you know, we are as an insurance company we are in the risk business and we've you know, we did not anticipate both lines of business you know, to couple together this year.
Speaker #1: However, you know, we've managed to do quite good profits the company made 600 plus profitability this year up to now. Inshallah we will be continuing to that direction.
Speaker #1: This is just a small glitch. Hopefully, it will not disturb the profitable growth story that we're having.
Speaker #4: So, one final question, right? So, good performance in the health segment, but when I look at the number three player, its premiums have meaningfully increased, right?
Speaker #4: Multiplied. So do you see this I mean, so do you see the risk of regulator actually encouraging let's say the number three player given how consolidated the health segment is?
Speaker #1: I'm... I'm... I kind of, you know, struggle to understand the question. Can you repeat it again? Sorry.
Speaker #4: So so I think the number three player in the health segment Medgulf had a very strong growth in gross return premium in the quarter, right?
Speaker #4: So it does look like some contracts have gone their way, right? Meaningfully from a small base their premium has increased. So I'm just trying to understand in your conversations with the regulator, do you get a sense that they're trying to sort of encourage more players in the health sector?
Speaker #4: Because it's a very consolidated sector, right? So I any thoughts on that would be helpful.
Speaker #1: You know, it's. Only earning call. So I don't want to comment on the competition, but so far given every results we've seen we've outgrown the market.
Speaker #1: So we've done 20%. If you want, I can comment on this offline with you, but you know, I don't want to make any comment on competitor on the market.
Speaker #1: In the in Townier's call, but you know, we've done a thorough analysis to the results that we've seen. The quality of our graph is is really you know, very nice.
Speaker #1: Even the the ratio of the profitability specifically to Townier health book despite the investment that we're doing now in Mina which is you know, you can see it on the non-attributable expense the qual the the profitability margins for Townier health is way way better than any any player in the market.
Speaker #1: So we've been promising an improvement on the profitability since five years. I joined Townier 2022 and I've joined the investor calls since that year.
Speaker #1: Alhamdulillah, every call that I attend we're seeing an improvement into the onto the the loss ratios. So we're we we're continuing into that segment.
Speaker #1: So any exposure you will have in Townier health inshallah we we are trying our best that you will see the better the best profitability given a single real invested into that segment.
Speaker #2: Thank you very much. Our next question concerned Trifurnis Spiru. From Veruma Capital. Your line is open. Please go ahead.
Speaker #4: Hi. Thank you very much for taking my questions. The first one is again on Moto. I was wondering if you can tell us what the underlying combined ratio is on excluding the impact from the two corporate contracts so we can better assess the what the the rest of the book is running in terms of the combined ratio.
Speaker #4: And related to that, I also noticed that the corporate Moto GWP has significantly reduced this year first half versus last year. I was wondering what drove this if these two contracts are are going to expire a year end.
Speaker #4: The second one is on the medical combined ratio. Again, I appreciate your your last comments, but we're looking at the half year the combined ratio is about 1% boards year on year.
Speaker #4: So my question is how should we expect the margin to to evolve directionally the second half? Just want to get a sense of how confident you are that the pricing actions in the Mina utilization is enough to mitigate the inflation.
Speaker #4: The third and final question relates to insurance and I was wondering if you had any changes to your reinsurance program given the last kind of hard market cycle.
Speaker #4: And I was wondering if you can share what the net potential is per weather event and perhaps related to the question now that you're growing into reinsurance as well, which presumably has a quite a big overlap with the PMC business, how can we comparable that the two business to not significantly institution more volatility in the results overall going forward?
Speaker #4: Thank you.
Speaker #1: All right. So I you know, I hope that I got the three questions right. So for the first one, you're saying what's the impact or what is the loss ratios or the combined ratios without the two bad badly performing contracts.
Speaker #1: Yeah.
Speaker #4: Yeah. Yeah. Exactly. Yeah.
Speaker #1: So you know, I I must say that you will see an improvement, you know, 6 to 8% points better than the current combined ratios if if you take those two away.
Speaker #1: I hope this gives you some leading you know, numbers. When it comes to the second question, you talked about the expectation of the medical book for the second half, isn't it?
Speaker #4: Yes, correct.
Speaker #1: Yeah. So you know, we we always see on Q4 the highest plus ratio across the four four quarters. However, we we are optimistic that it would be on the same you know, pattern given the second half.
Speaker #1: So you know, the medical book you can look at the way it behaved over the years and we are not expecting a major shift you know, to the to the ratios going forward, especially that you know, the the repricing will still flow you know, towards the end of 2026 and the beginning of 2027.
Speaker #1: For the third question, you're saying is our exposure to reinsurance and the weather claims that we had will give us a double impact. Is that right?
Speaker #4: Yes. I was wondering whether you you you're scaling up the reinsurance business, which presumably has quite a big overlap with the general business. So how should you think about the the large losses going forward?
Speaker #4: And then what is your net retention per weather event so we can.
Speaker #1: Yeah, yeah. So, yeah, good question. You know, for us in Tawuniya, we look into the total exposure for a single risk across our value chain.
Speaker #1: So from insurance and reinsurance. And for that, the reinsurance program addresses that we don't get an exposure combiningly. That is high versus our risk appetite.
Speaker #1: So either we do that with Saudi or we do a complete risk receiving with Riyadh based on the you know, the the risk that we are we are addressing.
Speaker #1: And you know, for the weather coverage is the the retention is almost at 10% or or or or you know, plus minus, but it is for a single risk is around 10 million.
Speaker #1: So you know, that's where you see the impact. Given the number of you know, claims that we had given you know, since we are the the largest PMC insurer in the market.
Speaker #1: And you know, if you are in the insurance business, you would expect one in a 40 years, one in a five years a big big you know, big year.
Speaker #1: Hopefully it is like what's what happened is will protected by reinsurance cover and and the distribution of of the risk based on the risk appetite we are we're we're following.
Speaker #4: That's extremely helpful. Just a quick follow up. If the do you also have an aggregate reinsurance? So if you have a let's say 10 weather events, then you can have extra cover from that as well.
Speaker #1: Yeah. You know, we have an additional cover that usually for the aggregate exposure that we get on the PMC book. So yes, you're right.
Speaker #1: So this is the the the beauty to the program that we are doing is the we understand the single risk and then there's a total retention exposure.
Speaker #1: So you get another cover there, given that we reach a certain value. Yeah, you're right.
Speaker #4: Thank you very much. Our next question comes from Michael Cristeles from UBS. Your line is open, Michael. Please go ahead.
Speaker #5: Hi, guys. Thanks very much for taking my question, too. Three questions, if I can. Firstly, on the motor book, can you talk a little bit about what went wrong with these two contracts?
Speaker #5: You've spoken a lot in the past about improving your pricing discipline and underwriting capabilities. So I'm just trying to understand, you know, how did how did you get these two contracts so wrong?
Speaker #5: What I appreciate there'll be there'll be sensitive information, but but what can you tell us about. What's gone wrong and and how it won't go wrong again.
Speaker #5: The second question is just what do you expect Motor to deliver in terms of margin through the cycle? Particularly with RBC coming we should see hopefully more underwriting discipline across the market.
Speaker #5: You know, where should the average margin be over time? And then thirdly, are there any updates you can give us about RBC? Have you done any sort of new quarterly reporting that that that gives us any indication of where we're going to land on RBC?
Speaker #5: Thank you.
Speaker #1: All right. So great great three questions. What went wrong in those two contracts? It's given the behavior of the corporate fleets. You know, you look into frequency of of the risk and the severity of of the risk.
Speaker #1: So these are two you know, major factors. That you look at. And for the two accounts, they had a unique values for the frequency and the severity.
Speaker #1: So both are higher than the average. And unexpected way. So we've we've couldn't get them right. And the get go in the beginning and we believe it's it's change in behavior.
Speaker #1: For you know, the the the big fleets especially you know, car rented companies. So this is this is what went wrong. And and you know, given the sophistication and the technology that we do in the underwriting, we've managed to you know, flag such pattern and and and now you know, this new pattern is been identified.
Speaker #1: And we've also spoken to the agencies that gives the costing. We call them takdir here in in in in Saudi. So these are the third party independent entity that does the pricing of damage.
Speaker #1: And also we've notified Najm given you know, if there is any fraud related activities. And and you know, we've taken all of those kind of mitigation plans.
Speaker #1: But you know, we we're kind of certain that there is no additional impact. And these contracts are not going to be you know, flowing again to the to the books with the way they were priced.
Speaker #1: When it comes to what the expectation from the mobility in Omar mobility sector, we've you know, shared last last strategic horizon that we are not going to exceed the loss ratio of 75% on the mobility book.
Speaker #1: And this is our threshold. Of course, you know, for some segments, such as the comprehensive—especially those who are with Drive—they enjoy a better, you know, loss ratio.
Speaker #1: Versus PP you know, given the the they have a higher higher risk relative to their premium. But in average, this is our our appetite and this is what we expect from our mobility book when it comes to to the ratios.
Speaker #1: For the third question when it comes to the RBC, I'll hand it to our head of actuary Tariq. Who can you know, shape some lights on it since he's the expert in the room.
Speaker #6: Yes, hello everyone. So indeed, as per the IA's requirement, there will be multiple dry runs during 2026. We have already submitted the year-end numbers, and we have also submitted Q1 as per the timelines of the IA.
Speaker #6: There will be multiple runs over for Q2 and Q3 subsequently. So from our side, we see that we had very comfortable solvency ratios under current regimes.
Speaker #6: And we continue to see that our solvency ratio is above 100% in the new regime. Again, it detailed and the optimization for the solvency requirement.
Speaker #6: It will take some time. Because even your investment book, even your underwriting so when you want to switch from one regime to another, there's there's a lot of optimization.
Speaker #6: And the company is working currently very diligently on on this aspect. We are also considering an internal capital model which might also support even reflecting the risk profile of Taunia.
Speaker #6: Again, these are some things that we are planning ahead of, and we believe that whatever we have seen as comfortable on the solvency—whether from a rating engine or from the regulatory bodies—we'll continue to honor the same under the new regime.
Speaker #4: Thank you very much. Before we move to our next question, please note we ask you to limit yourself to two questions per person. If you have any follow-ups, you may then re-enter the question queue.
Speaker #4: Our next question concerned Jonathan Milan. Mwaha Capital. Your line is open, Jonathan. Please go ahead.
Speaker #7: Hi. Thank you very much, Gentlemen. And thank you for taking the time for the call. Two questions from my end. The first question is on the medical book.
Speaker #7: I mean, on a trailing 12-month basis, once I include Q2—and I mean, you show it yourselves—profitability in terms of margin is slightly down year-on-year.
Speaker #7: And you've been repricing for quite a while and you've also repriced aggressively and very beautifully in H1. My question is at what point will we see an injection point in underwriting margins in the medical segment where we see an increase?
Speaker #7: I mean, is it as early as Q3 2026 or should we look at 2027 looking much better than 2026 rather? And that's the first question.
Speaker #7: And the second question is on ECLs. I understand that you are recouping a lot of previously made provisions. At what point do you think that you would have done everything you can?
Speaker #7: You've taken the ECLs to a very acceptable level, and going forward, you're going to see more of a normalized ECL. And what does a normalized ECL level look like?
Speaker #7: Because you can't just keep reversing and reversing. At some point, this thing's going to hit zero.
Speaker #1: Okay. So good to hear your voice, Jonathan. So I mean, for the first question, for for the medical, usually you you will see it in Q4 reaching its maximum value as as we you know, we started the repricing since last year.
Speaker #1: And you know, so this is going to be evident every quarter we we go forward in 2026 and and then you know, inshallah in 2027.
Speaker #1: For the ECL, since it's very technical, I'll hand it to Mohamed to answer it.
Speaker #6: Yeah. Sorry. There is some background noise. Not sure if from your side, Jonathan. Yeah. Okay. Thank you. So when it comes to ECL, post-implementation, once we adopted IFRS 17 and 9 back in 2023, we took I would say charges year on year and you maybe remember the beginning of the years it was of high magnitude.
Speaker #6: So today we have an ECL balance that we based on the optimization we've done, we we it merits a release. As we progress, usually when we put a plan, you you you assume the worst.
Speaker #6: Usually based on the typical behavior that's happening in in in the insurance sector overall, those are not settled like I would say in a timely manner.
Speaker #6: That's why you always assume in the plan that it's always a charge. The good thing today is that whenever we improve the old aging balances, or brackets related to plus 90 days, plus 180 days, plus 360 days, and some of them sometimes two or three-year-old dues.
Speaker #6: Maybe what we saw as an improvement recently is that even when it comes to litigation, it's much faster where we can collect our money faster.
Speaker #6: If client has been lapsed for the last two or three years. When it comes to fresh debts or fresh credit facility, we give to the customers.
Speaker #6: This is where we focus on that we don't want it to flow from the 1 to 30 days up to 30 to 60 days.
Speaker #6: And it doesn't overflow to 60 to 90 days. Therefore, we we don't see substantial charges related to those early buckets. Rather, it's an improvement of the older buckets and the balance we've been carrying for quite some time.
Speaker #6: As we progress, yes, maybe you've seen compared to the same period last year, it's not the same magnitude as we progress, you will see it minimizing more and more.
Speaker #6: But also depending on different factors because this is the net movement. So there is a charge, there is a release as well. But the net is positive for us now.
Speaker #6: It's something that we will continue keeping an eye on. We want to ensure that at least the ECL balance in our balance sheet is is optimal or at optimal state.
Speaker #6: But you will always carry a balance with you. But we believe that it was at a level that is higher than our desire or expectation.
Speaker #6: Therefore, we work closely to ensure that we minimize volatility and you don't see a charge release, charge release across different quarter. And for the past four or five quarters, we've seen continuous releases.
Speaker #6: So, I hope that answers the questions when it comes to ECL.
Speaker #7: So, we'll see maybe more of the same, but at a lower magnitude, and then maybe in 2027 or H2 2027, we see more of a normalized level where it's not big, big swings between a charge and—.
Speaker #6: Fair assumption, I would say, Jonathan.
Speaker #7: Thank you very much. Thank you very much, everyone.
Speaker #6: More than welcome.
Speaker #4: Our next question comes from Abdallah Al-Buraydi. Your line is open. Please go ahead.
Speaker #7: We're my audible.
Speaker #5: Yeah. Thank you very much for the great presentation, congrats for the great result. I have a question regarding the BMC. Maybe you've answered that before, but sorry, I wasn't locked to the bit.
Speaker #5: Do you see further claims coming in the BMC in the third quarter, or do you believe you're done with that evolving claim from last year regarding the weather?
Speaker #5: That's for the BMC. And second question regarding the medical. So you've been pricing since Q4 and maybe the first half was impacted by seasonal impact that took place in the first quarter and second quarter.
Speaker #5: But how do you see the third quarter, with a big part of the pricing and no seasonal movement? We are having almost a like-for-like third quarter.
Speaker #6: Okay. I'll I'll I'll answer maybe the question related to BMC and and maybe I'll leave the floor to our CEO when it comes to the health.
Speaker #6: But your voice was unclear maybe on the last part. So maybe after I answer BMC question, I'll I'll let you ask the question again related to health.
Speaker #6: So if we look at what happened in this first half in 2026 when it comes to claims, the amount we said it's 3.8 as gross and the net impact on our portfolio 70 million.
Speaker #6: This is the select claims that we looked at that was of I would say high impact on our portfolio. So it's around 14 to 15 claims.
Speaker #6: It's it's I would say usually it's typical claims. Some of it are related to fire damages, typical claims that we usually see. But maybe because it all came together, you saw of a high magnitude impact.
Speaker #6: Weather related, why we see why we are explaining that this is unusual. Because you don't see these severe weather conditions happening in Saudi year on year.
Speaker #6: So, a lot of hailstorm damage and a lot of flood damage happened to certain facilities related to policies we insure. And if you just multiply 15 times 5, you will reach 75, which I would say is the total impact on our portfolio.
Speaker #6: So it’s several claims. Usually, the proportion of each one is 5, 5, 5, 5 million. That’s where you see the impact on our bottom line. So related to weather, it’s around 60 to 70 percent.
Speaker #6: Another 20, 25 percent related to normal ones like fire damage or or business disruption. And then there is around 6 percent of other claims as well.
Speaker #6: So total impact is the 70 million. As we progress, that's why we mentioned at the beginning, these abnormal claims that we don't usually see in our portfolio related to weather condition, we did not see in Saudi in Q2 any severe weather conditions happening that we foresee that it might impact us in Q3 or Q4 going forward.
Speaker #6: So that's why I'm saying it's unusual. To see such major damages related to hailstorm, hailstorm, for example, damaged a lot of solar plants, it damaged a lot of vehicles sitting in the warehouses of of some major dealers and agencies.
Speaker #6: So those are usually when it happens, it's severe damage. If you have damage on solar plants, you know, solar panels, that's like I would say big impact on the customer.
Speaker #6: That's why. And this is why we are here as down here. Whenever that claim comes in, we ensure that we meet those liabilities and we ensure we give our customer the peace of mind they need whenever they need us.
Speaker #5: Yeah, but I mean, have you settled all those that upcoming from past services or do you still have a couple of incidents that are yet to be settled and seen in Q3?
Speaker #7: Yeah, sure. Once it's registered as a claim, it means that we will finalize all building this claim from the loss adjusters and what have you.
Speaker #7: And it's accounted for and it means that it's been it's been paid. All considered paid when it comes to the BMC business.
Speaker #6: And sorry, just to add, and usually for example, some of the claims that came in in Q1, once it's finalized in Q2, actually we've saw we saw a reduction in in the net amount that we retain.
Speaker #6: So usually that's why we vet we validate usually you take maybe a prudent position and more conservative where you assume the full amount. And once you finalize everything as settlement, usually what we see is a decline in the total payout.
Speaker #7: Yeah, absolutely.
Speaker #5: Okay. And regarding the medical yeah, go ahead. Sorry.
Speaker #7: It's واضح.
Speaker #5: Yes. So we have been repricing ransomly since Q4. And big part of the book or if if we assume that every quarter of the like, at least three fourth of the book has been repriced.
Speaker #5: And we're having the Q3 that is segregated from any seasonal movement. So do you see quite improvement in Q3? Year over year?
Speaker #7: Yeah, we like what we like what we see.
Speaker #5: Okay. Okay. Great.
Speaker #7: A little more than we like we see and we kind of seeing that impact. But as you know, the the health is a very huge book.
Speaker #7: And usually what we notice is between 0.5 to 1 point of improvement by the end of the 12 months of the either price or claims adjustment.
Speaker #7: So we're we're going into that direction, really steady and nice. And there's no surprises so far. And we are not expecting any major deviation.
Speaker #7: Given the market dynamics, we're seeing now and we're we're you know, if I am excited about one segment, it is it is the health.
Speaker #7: And I dare anyone in the market to come and do a health business better than what we did. But rest assured, from health, rest assured, thank you very much.
Speaker #7: Our next question comes from Karim Kakia. From Arkham Capital, your line is open. Please go ahead.
Speaker #8: Good afternoon, thanks for the presentation and congratulations on your results. Just a question on the reinsurance economics. Seeded premiums in the first half was up, I think 8 percent year over year, but the program absorbed nearly 3.8 billion gross event.
Speaker #8: And the hail damage you described to solar plants and the dealer vehicle stock is exposure that grows as the country builds up. So, what are you assuming for the cost and the attachment point of the aggregate cover at the January 2027 renewal?
Speaker #8: And does the higher retention under the national insurance strategy raise the net cost again? To simplify it, and should we expect the cost of reinsurance program to rise materially in 2027?
Speaker #6: So the majority are back. So it's priced in as individual cases. So that's why maybe it's not going to be on an aggregate level.
Speaker #6: But sorry, what was the last part of your question? So related to whatever we've seen, it's related to facultative treatment. So none of them are usually individually priced.
Speaker #6: But what was the second part of the question? Sorry.
Speaker #8: Yeah, but that would not impact the price on the renewal.
Speaker #6: No, usually we we will not we we we do not foresee any pricing impact. Again, our aim usually is that when once those impact happen, we try to isolate the impact from the customer level.
Speaker #6: But it depends on every case by case. And and we already had our renewal of treaty contracts in July. And it was smooth. So I don't foresee any uptake or hikes in pricing when it comes to reinsurance.
Speaker #6: So, it was just recently concluded.
Speaker #8: I was just asking about the national insurance sector strategy when they're pushing forward for an increased retention. Does that, do you think, impact the cost of reinsurance for you as well?
Speaker #7: So you're breaking up. You're breaking up.
Speaker #8: Oh, sorry. I'm saying just as the national insurance sector strategy. When you are increasing the retention ratios that you have in PMC as per the strategy, does the higher retention under the national insurance strategy increase the cost of PMC in your opinion, the net cost of it?
Speaker #6: Honestly, from our view, even like when we went to the capital market day and we explained our strategy, we said we do have an initiative in the pipeline, even prior to launch of of national insurance strategy to increase our retention.
Speaker #6: But the whole aim is to do a full and thorough assessment. Where do we increase our retention? Because we believe some of the sublines of business in PMC, we can easily increase our retention and it will yield higher value for us when it comes to profitability.
Speaker #6: Where we don't expose the company to additional risks overall on the portfolio. So once we kick off or or we kicked off that initiative initially now, it's an assessment phase where we're going to also embed the circumstances happening in the region to ensure that whenever we increase retention, we increase at the right subline of business with the right level of exposure based on our risk appetite.
Speaker #8: Thank you so very much, Doctor, for your time.
Speaker #7: Yeah.
Speaker #1: Our next question comes from Cairo Ghosh. Your line is open. Please go ahead.
Speaker #5: Hi. This is Cairo Ghosh. Just I think most questions have been answered. Just a couple of them. First is the investment income. That has been quite strong.
Speaker #5: How do you see it going ahead? Would it be sustainable I mean, sustained? Was there any one-off, especially if interest rate remains at this level?
Speaker #5: How do you see this investment income coming up? That's my first question. And the second one—just a small clarification which I wanted to get a sense of.
Speaker #5: In the call, does you were saying that the engineering this premium reduced because of lower giga projects. Why did the energy business reduce? I mean, I missed that point.
Speaker #5: Yeah. These are my two questions.
Speaker #7: Yeah. So for for the investment, the asset classes that we are investing in is yielding really the desired results. And you know, we're kind of locked for for the year.
Speaker #7: Inshallah, we're we're expecting it to continue if it's not on the same you know, level hopefully better. I will you know, regarding the engineering projects, we our portfolio has and PMC consists 30 percent of its premium from you know, revenue mix coming from the engineering projects.
Speaker #7: And these are mainly giga projects. So what I was saying that despite the you know, big claims that we had, which we've managed to you know, handle through the reinsurance, we also had another impact on the tubline impacted by the reduced number of engineering project committed for this year given the restructuring or the rephasing of the governmental project.
Speaker #7: So this impacts the revenue, given the portfolio mix and the commissions that are related to those projects. So, you know, the book you see today this year in PMC is different than the book you saw last year.
Speaker #7: Given that change in mix, I hope I answered that.
Speaker #5: Yes. And just one small one line which you said which I missed. So did you say that the single company risk is 10 10 billion Saudi riyal?
Speaker #5: Did I hear that correctly?
Speaker #7: Yes, correct.
Speaker #5: Okay. Okay. Okay. That's all from my side. Thank you very much.
Speaker #1: Our next question comes from Raf Al-Hussein. Your line is open. Please go ahead.
Speaker #5: Thank you, management, for the presentation. I just have two questions. My first questions is regarding the medical segment. You mentioned that in Q2 there there was a seasonality impact.
Speaker #5: If you can explain that, because as per my understanding, Ramadan is the biggest factor in terms of seasonality. And in both years, we had Ramadan during Q1.
Speaker #5: So how is Q2 2026 is different from last year? And the second question is regarding the large corporate motor book if you can elaborate more how is the nature of the contract?
Speaker #5: Can you reprice annually and basically recover whatever you have lost in these contracts?
Speaker #7: Okay. So you're correct about Ramadan and the seasonality, but if you look at Eid and post-Eid impact, this year happened mainly in in Q1.
Speaker #7: So last year, it was kind of in the middle. So that's what we meant because we benefit from the seasonality in Q1 and at that time if you remember in the call we said that we are this is not all you know, related to the medical book.
Speaker #7: It's also about the seasonality given the the shift that we saw in in in Q1. For the motor business, if the if those contracts will be renewed, which I you know, will be happy to you know, kind of renew them at the right price, given the current experience that we saw and the new trends that we saw, if the client is willing to renew with the adequate price given to to that risk, we're we're happy to do so.
Speaker #7: I'm I'm not sure that the client will be willing to to do that. But for us, we got for us, it's a new data point that that is reflected into our pricing model given that new behavior in the in the corporate accounts.
Speaker #5: Okay. That's clear. Thank you.
Speaker #7: Yeah. You're welcome.
Speaker #1: Our next question comes from Shuk Al-Sharamni. Your line is open. Please go ahead.
Speaker #5: Hello. Can you hear me? Allah. Thank you so much for the call. Very insightful explanation regarding all the business segment. I'll not take long from your time.
Speaker #5: I have a question regarding the protection and savings segment. We can see that the segment is picking up significantly, but I just want to understand the dynamics behind the combined ratio increase that we saw in the first half.
Speaker #5: And what's driving that?
Speaker #7: Yeah. Yeah. It's part one. So it's the added investment of of that kind of product. You know, these this is a long-tail product that it requires some investment in the beginning, especially that they're evolving in it.
Speaker #7: So this is the reason especially with some of the channels you know, banks and and and what have you, we it requires initial investments so that's why you see that cost spike.
Speaker #5: Very clear. And just so I know, there have been a lot of questions on the medical, but just emphasizing the importance of this segment.
Speaker #5: Just when I looked at the GDP GWP by I would say by segment looking at corporate retail, still go corporate is growing in the first half by 22 percent.
Speaker #5: And when I look in the first half expense is growing by 21. So I'm just thinking out loud here, is it like you're just increasing your corporate book by like to cover the run rate increase that is happening in the expense.
Speaker #5: So you said that we should see an improvement in the combined ratio going to the year end and next year. Is that growth in the corporate is driven by pricing mainly could could you just shed some light if you that go some of the of the contract or is it renewal of the existing one with minimal price increase?
Speaker #5: And gaining more market share in the volume.
Speaker #7: Yeah. You know, you know, you're you're absolutely right. But you know, you know, we are juggling between and the and the and the portfolio mix.
Speaker #7: You're you're juggling between size you know, across the quarter. So you will see that major big accounts will be renewed at the first half and that's why you will see weak weak contribution to that product mix will be a little bit shifted.
Speaker #7: However, throughout the year, because you know, SME size compared to the corporate size is is different. So throughout the the second half, you will see that the SME book will grow you know, steadily and slowly.
Speaker #7: And then, towards the end of the year, you will see the balance, you know, and you compare year over year. You will see that the right mix of the corporate and key account versus the SME.
Speaker #7: I know SMEs are a book that is new and renewed on a fixed basis across the 12 months, whereas for corporate and key accounts you will see big seasonality, especially in, you know, the first half versus the second half.
Speaker #5: Yeah, just because previously you hinted about how much is profitable—SMEs versus corporate. So if the massive growth is coming in the corporate, I'm just worried about the combined ratio.
Speaker #5: Although that you said that you are happy with what's happening and you can see clearly the improvement. So I just wanted to confirm in that.
Speaker #7: Yes. Yes. There's a there is a negative has has the first half you will see a big improvement on the in the size of the corporate in the first half you see the majority of our renewal then in the second half you will not see as much like an SME will be increasing.
Speaker #7: He has just about it's a time lag once Q4 is concluded you will see the balance of that portfolio mix.
Speaker #5: Very clear. Thank you so much. Just if I may just ask question from my side. On the P&C, if we looked at the mix you mentioned that you're shifting away the mix giving the current demand in the market.
Speaker #5: But we saw a massive increase when it comes to micro size in the P&C segment. So, this book—I would say you're comfortable when it comes to the pricing and the risk profile.
Speaker #5: Do you see it as more profitable versus the large corporates that you used to sign with?
Speaker #7: Yeah. It's a it's a different nature. P&C is quite you know, complex. It's around portfolio of 70 to 90 products. Yes, these products are profitable.
Speaker #7: However, they're they're premium is way way small versus the other kind of risk. So these are embedded insurance where where you can see it in Amazon and you see it on you know, travel insurance.
Speaker #7: You see it in malpractice. So as much as it grow in in in in you know, versus the baseline, this graph will not manage to to give you the earned premiums from a single big project like Neom, for example, or or what have you.
Speaker #7: So, you know, in P&C, you need to think about it a little bit differently.
Speaker #5: Got it. Thank you so much. Thank you for the call, and thank you for being patient with our questions.
Speaker #7: All right. So thank you very much.
Speaker #1: Thank you very much. We currently have no further time for questions on the line. A survey will appear on your screen, and the team would appreciate your feedback on today's presentation.
Speaker #1: I will now hand back to the CEO, Dr. Othman Al-Kasabi, for some closing remarks.
Speaker #7: All right. So you know, thank you very much for attending to our session today. We tried as much as possible to be predictable to you as promised.
Speaker #7: You know, for me, you know, we remain you know, very very committed to you know, trying our best you know, executing our our strategy.
Speaker #7: We we believe that you know, given the dynamics of of the market and the ambition that the countries having where the national insurance strategy that Taunia is best suited to you know, lead the benefit out of that market potential, please help us improve our declaration, our reporting to the way that suits you and make you more comfortable.
Speaker #7: Abd Rahman and his and and the team and the investor relation is you know, you know, enable to to do that. And inshallah, as as our journey continue, with you guys, we will be you know, improving our our reporting to to your satisfaction and looking forward to see you inshallah in the next call.
