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  • 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 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    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

    Page 2

    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

    Page 3

    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.

  • F I N C O R P W E A L T H M A N A G E M E N T

    Page 4

    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

    Page 5

    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

    Page 6

    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

    Page 7

    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

    Page 8

    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

    Page 9

    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.

  • F I N C O R P W E A L T H M A N A G E M E N T

    Page 10

    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

    Disclaimer

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    of this report. The information contained has been obtained from sources believed to be reliable and in good faith, but which may not be verified independently. While

    utmost care has been taken in preparing the above report, FINCORP makes no guarantee, representation or warranty, whether express or implied, and accepts no

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