al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina 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ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo note fincorp investment research al madina takaful ipo
INVESTMENT RESEARCH
INITIAL PUBLIC OFFER (IPO)
RESEARCH NOTE
Offer Opens: October 29, 2013
Offer Closes: November 27, 2013
Offer Price: Bzs 140 per share
Fair Value: Bzs 151 per share
AL MADINA INSURANCE
COMPANY SAOG
(Under Transformation)
IPO NOTE
November 2013
ANALYST
Nandakumar Chenicheri
Asst. Vice President - AMD
Email: [email protected]
Tel: (+968) 24822300 Ext. 353
Mable C. Pereira
Asst. Vice President - Research
Email: [email protected]
Tel: (+968) 24822300 Ext. 342
AL MADINA INSURANCE COMPANY SAOG
(Under Transformation)
INVESTMENT CASE
Al Madina Insurance Company SAOG (AMI) is the eighth largest insurance
company in Oman in terms of gross written premium (GWP) with a 5% market
share in FY 2012. The company is backed by strong promoters which include
prominent institutions and pension funds based in Oman.
The company has been able to steadily increase its GWP and has turned
profitable in FY 2012. On the cost side, the company has been able to gradually
bring down its net claims ratio and thereby improve its bottomline.
AMI will have the first mover advantage as it will be the first takaful company in
Oman. As the company already has an established network of key distributors,
it will have an additional competitive advantage over its peers in distribution of
takaful products.
Key factors for growth of takaful in Oman include its young population,
improving life expectancy, nascent market for shariah compliant products and
low penetration in life & medical segments.
Valuation: We have valued AMI by adopting relative valuation method based
on Price to Book Value. As the company’s takaful business is still in a nascent
stage, we have provided a discount of 10% to the average P/BV multiple of
1.46x of peer companies for valuation. We have estimated book value per share
of RO 0.143 in FY 2015 compared to that of company’s projections at RO 0.149
per share. Value of Al Madina two years forward based on a P/BV of 1.3x and
2015E book value per share of RO 0.143 is RO 0.185. We have discounted this
value by an estimated cost of equity of 10% to arrive at a present value of
RO 0.151 which is our fair value target price.
Further upside could come from higher demand for takaful products, existing
conventional customers shifting to takaful, lower claim ratios, better
investment returns and higher profitability.
Post IPO, Al Madina with its better capital adequacy ratio, is expected to emerge as a significant player in the nascent takaful business in Oman.
WEALTH MANAGEMENT
Recommendation
NEUTRAL
ISSUE PRICE (RO) : 0.140
TARGET PRICE (RO) : 0.151
OMAN
INSURANCE SECTOR
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
RISKS & CONCERNS
Regulatory Risks
The company will get the final Takaful license subject to the completion of the IPO. In the event of the Takaful
license being delayed, the Company would not be in a position to commence Takaful operations and would
continue as a conventional insurance company. Takaful has only recently been permitted in Oman and the
CMA has issued a draft Takaful Law. However, the Takaful Law has not been formalized pursuant to a Royal
Decree. The absence of a clear regulatory regime governing the provision of Takaful services exposes the
Company to uncertainty with respect to its regulatory obligations.
Insurance Industry is highly competitive
The insurance sector in the Sultanate is highly competitive. Twenty one insurance companies are currently
licensed, with three additional insurance companies (including the Company) seeking approvals for Takaful
licensing. The competition is expected to intensify between the Company and recent entrants seeking to obtain
and increase their market share by offering competitive prices and innovative insurance products. Increase in
competition may affect the premiums earned, the earnings and the financial position.
Non-conversion of existing conventional insurance into takaful policies
Al Madina will give the option to existing policyholders to convert their conventional policies into takaful
policies. If the existing policies do not get converted to Takaful policies, the Company’s subscribed premiums
can go down and earnings will get affected.
Slower acceptance of takaful products
Any slowdown in acceptance of takaful products can impact the GWP of the company in future years and
earnings can get adversely affected. Also, as insurance policies are for a one-year period, any non-renewal of
policies can impact the earnings.
Fluctuations in Investment Income
Earnings growth of insurance companies is largely driven by growth in investment income. Fluctuations in the
financial markets, the rate of return on investments and market liquidity can impact the investment income.
Regulatory restrictions and unavailability of financial products can also impact diversification among asset
classes and the investment income.
Slowdown in Government expenditure can impact insurance sector growth
Government’s income is highly dependent on oil prices. Any decline in oil prices owing to global market factors
can affect Government’s expenditure plans. Any substantial decline in industrial, residential and infrastructure
projects may consequently affect the growth opportunities for all insurance companies.
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
FINANCIAL PROJECTIONS
The Company will use the additional capital raised through IPO to increase its Net Retention and the size of its
Reinsurance Treaty. The Company intends to improve its capital leverage ratio and the capital infusion is
expected to assist the Company in expanding its distribution and customer support network in the country
through branches and customer service outlets.
While the company has given its own financial projections in its prospectus, we have taken our own
assumptions and have provided our forecasts in this report. Company’s GWP grew 19% YoY in FY 2011 and FY
2012. With competition intensifying among the insurance companies and shift from conventional into the
nascent takaful business in Oman, we expect the Company’s gross insurance premiums to grow annually by
12% from FY 2013 to FY 2015. The company is expected to grow its premiums in the life & medical and motor
businesses.
Net retained contributions is expected to be 49% in FY 2013 and 50% in FY 2014 & FY 2015. Premium retention
levels are expected to be 44% in FY 2013, 48% in FY 2014 and FY 2015. Premium retention level was 40% in FY
2012.
Net claims ratio has been on a downward trend from 86.7% in FY 2011 to 58.6% in H1 2013 which is positive for
the company. Net claims ratio is expected to be 54% in FY 2013 and 60% in FY 2014 & FY 2015.
Net commission expense as a percentage of GWP were 2.23% in FY 2012 and 2.04% in H1 2013. Net
commission expense is expected to 2% of the GWP from FY 2013 to FY 2015.
Company’s general and administrative expenses as a percentage of GWP is expected to be 15% in FY 2014 and
14% in FY 2015.
With respect to its investment portfolio, we expect income from available for sale investments and held to
maturity to be RO 80,186 in FY 2013 as against company’s projections of RO 240,939. In FY 2014 & FY 2015,
while the company expects 12% returns per annum on all types of investments in securities, we have adopted a
conservative approach and estimated an average 8% returns on investments in securities held for trading and
5% returns on Available for Sale investments and Held to Maturity. Investment properties are expected to yield
8% returns and Bank deposits are expected to yield 3% returns on an annual basis which are in line with
company’s projections.
Takaful companies can only make shariah investments unlike conventional insurance companies which have a
more wider spectrum to invest. As financial markets can also sometimes be volatile, we expect Al Madina to
provide further allocation to bank deposits more than projected by the company and a lower allocation for
investments at fair value through profit or loss compared to that of the company’s projections. We also expect
lower allocation for investment in properties compared to that of company’s projections. As a takaful company,
AMI is also governed by restrictions from CMA regarding investments which include not more than 30% of
investments allowable in listed or unlisted shares, not more than 20% in Real estate and not more than 30% in
corporate sukuks. Bank deposits/cash/sovereign sukuks need to be a minimum 30% of the total investment
portfolio.
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
Projected Income Statement 2013E 2014E 2015E
(Values in RO)
A) Projected Income of policyholders:
Gross takaful contributions revenue 18,911,301 21,180,657 23,722,336
Net retained contributions 9,266,537 10,590,328 11,861,168
Movement in unearned contributions (915,999) (489,497) (560,440)
Net earned contributions 8,350,539 10,100,831 11,300,728
Net claims incurred (4,509,291) (6,060,499) (6,780,437)
Takaful income 3,841,248 4,040,332 4,520,291
Net commission expense (378,226) (423,613) (474,447)
Net Underwriting results 3,463,022 3,616,719 4,045,844
Policyholder's investment income - 289,900 365,382
Mudarib share - (217,425) (274,036)
Wakalah fees - (3,600,712) (4,032,797)
Surplus of policyholders 3,463,022 88,483 104,393
B) Projected Income of Shareholders:
Shareholders investment and other income 1,070,695 1,290,490 1,385,384
Mudarib share from policyholders - 217,425 274,036
Wakalah fees from policyholders - 3,600,712 4,032,797
Other income 100,000 100,000 100,000
Total Income 1,170,695 5,208,626 5,792,217
General and administrative expenses (3,084,899) (3,158,850) (3,321,127)
Profit before tax (1,914,204) 2,049,776 2,471,090
Taxation 513,185 (136,527) (181,713)
Net Profit of shareholders (1,401,019) 1,913,249 2,289,377
other comprehensive expense
Net change in fair value of available for sale investments
(98,058) - -
Total comprehensive income of Shareholders (1,499,077) 1,913,249 2,289,377
Total Comprehensive Income - Policyholders & Shareholders
1,963,944 2,001,732 2,393,770
Profits for EPS * 2,062,033 1,913,249 2,289,377
Weighted Average Shares 111,111,112 166,666,667 166,666,667
Earnings Per Share (EPS) 0.019 0.011 0.014
EPS Growth 23.7% -38.1% 19.7%
Dividend Per Share - 0.005 0.005
Dividend Yield - 3.6% 3.6%
* EPS for FY 2013 is based on the total profit as the entire profit in FY 2013 is attributable to equity shareholders in absence of takaful operations. Source: Company Disclosure, FINCORP Research
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
Source: Company Disclosure, FINCORP Research
Projected Balance Sheet 2013E 2014E 2015E
(Values in RO)
Property and Equipment 917,812 805,029 683,497
Investment Properties 2,600,000 5,616,000 6,065,280
Deferred tax assets 513,185 376,658 140,937
Available for sale investments 636,535 636,535 636,535
Retakaful, takaful and other receivables 12,144,061 14,054,057 16,000,000
Advance and other assets 353,074 353,074 353,074
Investments held to maturity 253,038 253,038 253,038
Investments as fair value through P/L 9,638,010 10,409,051 11,241,775
Bank deposits 12,651,469 11,382,467 14,592,562
Cash and bank balances 935,241 817,285 811,817
Total assets 40,642,425 44,703,193 50,778,514
Shareholder's Equity
Share capital 16,666,667 16,666,667 16,666,667
Share premium 2,294,483 2,294,483 2,294,483
Legal reserve 453,474 689,940 986,922
Contingency reserve 674,743 674,743 674,743
Fair value change available for sale 135,551 135,551 135,551
Retained earnings (128,635) 839,591 1,993,984
Proposed dividend 833,333 833,333 1,000,000
Total shareholder's equity 20,929,616 22,134,308 23,752,350
Total policyholder's fund - 88,483 192,875
Liabilities
Employees end of service benefits 117,478 127,757 139,557
Retakaful and takaful contract liabilities 8,741,269 10,419,859 12,211,514
Unearned premium and commission reserve 9,099,325 10,178,051 12,727,482
Other liabilities 1,754,737 1,754,736 1,754,736
Total Liabilities 19,712,809 22,480,403 26,833,289
Total Equity, Policyholder's fund and liabilities 40,642,425 44,703,193 50,778,514
Book value per share 0.126 0.133 0.143
Return on Average Equity 13.3% 8.9% 10.0%
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
VALUATION
We have valued AMI by adopting relative valuation method based on Price to Book Value. As the company’s
takaful business is still in a nascent stage, we have provided a discount of 10% to the average P/BV multiple of
peer companies. Value of Al Madina two years forward based on a P/BV of 1.3x and book value of RO 0.143 is
RO 0.185. We have discounted this value by an estimated cost of equity of 10% to arrive at a present value of
RO 0.151 which is our fair value target price.
Relative Valuation based on Price to Book Value
P/BV Dhofar Insurance 1.67x
Oman United Insurance 1.54x
Bahrain National Holding 1.35x
First Takaful Insurance Company 1.16x
Dubai Islamic Insurance Company 1.59x
Average P/BV Multiple 1.46x
Book Value - 2015E 0.143
Value two years forward based on 2015E BV & expected P/BV Multiple of 1.3x 0.185
Fair Value (RO) 0.151
Note:P/BV of Peers at market price as of 13th November and last reported book value
Source: Company disclosure, FINCORP Research
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
Issuer Al Madina Insurance Company SAOG (Under Transformation)
Authorized share capital RO 25,000,000 divided into 250,000,000 Shares with a nominal value of Bzs 100 per Share
Pre-IPO Paid up Capital RO 10,000,000, divided into 100,000,000 Shares with a nominal value of Bzs 100 per Share
Offered shares 66,666,670 Shares representing 40% of total issued and paid-up share capital post IPO
Face value Bzs 100 per share
Offer price RO 0.140 per Offer Share (comprising a nominal value of Bzs 100, a premium of Bzs 38 and the Offer Expenses of Bzs 2).
Offer period and listing
Issue Opens on: October 29, 2013 Issue closes on: November 27, 2013 Approval of CMA of allotment: December 9, 2013 Refund process will start by December 9, 2013 Shares would be listed for trading on the Muscat Securities Market from December 10, 2013
Purpose of the IPO
The proceeds of the Offer shall be used for:
increasing the retention and overall insurance capacity,
strengthen the overall capital leverage ratio and
expand infrastructure and distribution network of the Company The expected net Offer Proceeds will accrue to the Company and no part thereof will be paid to the Pre-IPO Shareholders.
Limit for the subscription under one application
Minimum Limit
Category I: 1,000 shares and in multiples of 100 thereafter.
Category II: 100,100 shares and in multiples of 100 thereafter
Maximum Limit
Category I: 100,000 shares
Category II: 6,666,600 Shares, representing 10% of the Offer.
Proposed allocation of shares
In case of over-subscription, the Offer of 66,666,670 shares shall be split among the eligible investor groups, in the following portions: Category I Investors: 43,333,335 Shares, being 65% of the Offer, on a pro-rata basis. Category II Investors: 23,333,335 Shares, being 35% of the Offer, on a pro-rata basis. A minimum number of Offer Shares may be distributed equally among subscribers, taking into consideration small subscribers and the remaining Offer Shares shall be allocated on a pro-rata basis. Any under subscription in any Category shall be carried to the other category.
Eligibility Omani and non-Omani individuals and juristic persons. All GCC individuals and juristic persons are treated as Omani individuals and juristic persons.
Restrictions to Persons subscribing for Shares
The following applicants shall not be permitted to participate in the subscription: 1.) Sole proprietorship establishments: The owners of sole proprietorship establishments may
only submit applications in their personal names. 2.) Multiple applications: An applicant may not submit more than one Application. 3.) Joint Applications (i.e. applications made in the name of more than one individual) including
applications made on behalf of legal heirs are not permitted. Applications should only be made in the single name of each Applicant
4.) Trust Accounts: Applicants registered under trust accounts may only submit Applications in their personal names
5.) Related entities: Applicants for Shares are required to comply with the CMA’s regulations concerning related parties
Applications that do not comply with these conditions or restrictions, as applicable, may be rejected without notifying the Applicant
Issue Manager Bank Muscat SAOG
Subscription Banks Bank Muscat, National Bank of Oman, Oman Arab Bank, Bank Sohar, Ahli Bank
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
COMPANY OVERVIEW
AMI was incorporated and registered as a closed joint stock company in the Commercial Register on 15 May
2006. The Company is the eighth largest insurance company in Oman (in terms of GWP) with a market share of
5% in FY 2012. At an EGM held on 25 February 2012, the Pre-IPO Shareholders resolved to transform the
Company into a SAOG. Company has come out with an IPO primarily because takaful companies need to be
listed prior to commencement of operations.
The CMA, by way of a letter issued on 26 August 2013, granted its final approval to the Company to practice
Takaful and the final license shall be granted on transformation from a closed joint stock company to a public
joint stock company.
AMI’s activity post-IPO would be to carry on all insurance and investment business in the field of Takaful
authorized by the CMA, the CCL and the applicable insurance law, in accordance with the rules and principles of
Shariah. The Company’s current objectives are to carry on insurance and reinsurance business, family (life)
Takaful, industrial insurance, liability insurance, marine, air & transport insurance, motor insurance, financial
loss insurance, personal accident insurance, property insurance and other types of insurance. In the event that
the CMA restricts or limits certain type of Takaful activities or products pursuant to the issue of the final Takaful
regulations, the company will have to modify the object clause of the Articles accordingly.
The CMA has circulated a draft Takaful Law. However, as of the Prospectus Date, the Takaful Law has not been
issued in final form. It is anticipated that once the Takaful Law is finalized, it shall be issued pursuant to a Royal
Decree and the Takaful regulations shall be issued by the CMA in the form of an administrative decision.
Consequently, all Takaful companies in Oman shall be required to comply with the Takaful Law and the
regulations issued pursuant thereto as soon as it being issued.
SHAREHOLDING PATTERN
Mohammed Al Barwani Holding Co. LLC (MB Holding) is currently the largest shareholder in AMI. It will hold
25.90% stake in the company post IPO.
Shareholding Pattern - Pre & Post IPO
Shareholders Pre-IPO Post-IPO Mohammed Al Barwani Holding Co. LLC 43.10% 25.90%
Al Madina Financial & Investment Services SAOC 12.00% 7.20%
Ministry of Defence Pension Fund 10.00% 6.00%
Diwan of Royal Court Pension Fund 3.00% 1.80%
Doha Bank 3.00% 1.80%
Other Pre-IPO Shareholders 28.90% 17.50%
Public - 40.00%
Total 100.00% 100.00%
No. of Issued Shares 100,000,000 166,666,670 Source: Company Disclosure
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
Other shareholders are Al Madina Financial & Investment Services SAOC, Ministry of Defence Pension Fund,
Diwan of Royal Court Pension Fund and Doha Bank. As the purpose of the IPO is to raise additional capital for
expanding the insurance capacity and getting into takaful business, the promoters will continue to hold the
same number of shares before and after the IPO.
INSURANCE SECTOR OVERVIEW
The insurance market in Oman in terms of GWP continues to grow in double digits. GWP grew by 17.9% in FY
2012 compared to a growth rate of 14.2% in FY 2011. GWP amounted to RO 329.7 million in FY 2012 compared
to RO 279.6 million in FY 2011. By segment, property insurance recorded the highest growth rate of 29% in FY
2012. The growth rate achieved in GWP during FY 2012 led to a 21.4% YoY growth in the net premiums
amounting to RO 173 million. Motor insurance recorded the largest share of the net insurance premiums at
66.7% in the Sultanate. Life & medical insurance was second accounting for 21.2% of the net insurance
premiums.
Insurance depth is the rate of GWP to the GDP. According to the table below, the insurance depth increased to
1.10% in FY 2012 as compared to 1.04% in FY 2011.
Insurance Depth (% of GDP) 2010 2011 2012 Total Health Insurance 0.18 0.23 0.29
Total General Insurance 0.90 0.81 0.81
Total 1.08 1.04 1.10 Source: MONE, Company Disclosure
Insurance density is the individual spending rate on insurance (GWP divided by population). According to the
table below, the insurance density increased to RO 109.9 in FY 2012 as compared to RO 84.9 in FY 2011.
Individual Spending (RO) 2010 2011 2012 Total Health Insurance 14.7 18.4 28.7
Total General Insurance 73.6 66.4 81.2
Total 88.3 84.9 109.9 Source: MONE, Company Disclosure
Reinsurance in FY 2012 represented 47% of the GWP (about RO 157 million) compared to 49% in FY 2011.
Reinsurance in properties, transport and engineering insurance is the highest compared to other branches of
insurance, which is considered a drain for the local reserves of foreign currencies and a loss to the national
economy.
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
The following table shows GWP distributed by line of business for the period FY 2010 to FY 2012:
RO Million 2010 2011 2012
Lines of business Gross
Premium % of
Gross Gross
Premium % of
Gross Gross
Premium % of
Gross Marine 14.9 6.1 17.5 6.2 12.2 3.7
Property 48.3 19.7 41.5 14.9 42.7 13.0
Motor 103.8 42.4 114.8 41.1 135.8 41.2
Life & Medical 40.9 16.7 60.8 21.7 86.1 26.1
Others 37.0 15.1 45.0 16.1 52.8 16.0
Total 244.8 100.0 279.6 100.0 329.7 100.0
Source: MONE, Company Disclosure
Total insurance premium in Oman is projected to grow at a CAGR of 5.9% from RO 357 million in FY 2013 to
reach RO 447 million in FY 2017. Among the sub segments, total non-life premiums are expected to grow at a
CAGR of 5.8% over the period from FY 2013 to FY 2017 to reach RO 366 million in FY 2017. Penetration ratio for
non-life insurance is projected to grow at 1% over the period. Accordingly, total life premiums are projected to
grow at a CAGR of 5.7% over the period from FY 2013 to FY 2017 to reach RO 81 million in FY 2017 with the
penetration ratio growing from 0.2% in FY 2012 to 0.21% in FY 2017.
Source: BMI Insurance Report Q2 2013, CMA
1.6% 3.1%
6.0% 7.0% 6.6%
7.7% 6.5%
6.1% 5.2% 5.5%
2013F 2014F 2015F 2016F 2017F
Projected Growth Rates (%)
Life premiums Non-life premiums
65 67 71 76 81
292 311 330 347 366
2013F 2014F 2015F 2016F 2017F
Insurance Premiums (RO million)
Life premiums Non-life premiums
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
Insurance Sector in Oman is highly competitive with about 21 companies. Dhofar Insurance Co. SAOG is the
largest insurance company accounting for 17% of the GWP (RO 54.3 million) in FY 2012. The top 8 companies
have a combined market share of 75% of the GWP in the Sultanate (Source:CMA).
TAKAFUL MARKET OVERVIEW
Takaful is one of the fastest growing segments of the global insurance market. Global takaful contributions
reached USD 9.2 billion in FY 2010, representing a growth of approximately 32% in FY 2010 and a combined
CAGR of 29% between FY 2005 and FY 2009. According to Ernst & Young, the global Takaful market was
estimated at USD 12 billion in FY 2012, of which GCC accounted for 70%.
In the GCC, over 77 companies are licensed to offer Shariah compliant insurance products. Within this region,
KSA dominates the Takaful market with nearly 80% of the Takaful market share in FY 2011 and UAE has 13%
share. Despite a gross Takaful contribution of USD 6.4 billion (including Saudi co-operatives) from the GCC
markets in FY 2010, Oman currently has no share of the regional market.
The share of Islamic finance in GCC and Malaysia is 25% and 22% respectively, whereas Takaful market share is
15% and 10% respectively. Takaful has atleast 10% of the known Shariah inclined market that has not yet been
tapped. As the industry matures and establishes stronger distribution capabilities, this additional market space
can get converted into business. The Takaful sector is expected to grow at a CAGR of 23.0% between FY 2011
and FY 2016 to USD 1.2 billion. The brisk rate of expansion in the family Takaful segment is likely to help in
improving the overall life insurance penetration and density in the GCC. It is believed that Islamic banking,
which has now developed a strong footprint in the region, would play a key role in helping Takaful providers to
reach a large audience through the banctakaful channel (Islamic variant of bancassurance).
Dhofar Insurance 17%
National Life Insurance 13%
Oman United Insurance 11%
Al Ahlia Insurance 10%
The New India Assurance 8%
Oman Qatar Insurance 6%
Axa Insurance 5%
Al Madina Insurance 5%
Others 25%
Companies by GWP - FY 2012
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
TAKAFUL IN OMAN
Growing population and higher life expectancy is expected to have a positive impact on the demand for
insurance products in Oman.
As there exists an “only Islamic” segment that is currently absent from the market (Source: World Takaful
Report 2012 – Ernst & Young), approximately 20% of the potential customers are those which shall not
participate in the market unless a Shariah compliant product is available. As the insurance density in Oman is
also lower than the average insurance penetration in GCC, the introduction of Takaful in Oman is expected to
draw uninsured sections of the population in Oman into the insurance sector.
Competition between insurance companies in Oman is particularly intense in personal insurance lines, like
motor and medical. Recently established and smaller companies could suffer which severely hampers their
profitability and return on assets. At the same time, low levels of penetration and potential for growth continue
to attract new companies. Takaful companies will need to differentiate themselves based on the strength of
their product offering and service quality.
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
NOTES
F I N C O R P W E A L T H M A N A G E M E N T
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AL MADINA INSURANCE COMPANY SAOG – IPO NOTE
RESEARCH
CONTACT DETAILS
Nandakumar Chenicheri (+968) 24822300 Ext: 353 [email protected]
Gaurav Ramaiya (+968) 24822300 Ext: 348 [email protected]
Mable C Pereira (+968) 24822300 Ext: 342 [email protected]
BROKERAGE
CONTACT DETAILS
Mohammad Al Ghalayini (+968) 24822300 Ext: 333 [email protected]
Deena Omeir (+968) 24822300 Ext: 334 [email protected]
The Financial Corporation Co SAOG (FINCORP)
PO Box 782, PC 131, Sultanate of Oman
Tel: +968 24822300 | Fax: +968 24812925
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