Despite a partial recovery from the COVID-19 pandemic, the year under review continued to be challenging. The experience of the last two years caused a paradigm shift in the insurance industry for customers around the world. Digitalization, new risks, and new demands are fundamentally changing the industry.

In this challenging environment, guided by Strategy Towards 2026, Saudi Re followed a client-centric approach and commitment to market development while following sustainable practices. Success of this approach is amply demonstrated in the results of operations and growth in business volumes recorded for the year.

2021 earnings were supported by an increase in the net underwriting income by 3.58%, while investment income grew by 25% creating a reasonable balance between the two revenue streams.

Saudi Re’s shareholder equity reached SR 964 million by the end of 2021 with an increase of 4.4% compared to the previous year. Additionally, the total assets grew by 11.18% to SR 3.12 billion, while our technical reserves stood at SR 1.6 billion as of 31 December 2021.

9.1 Revenue

Five year summary

The Gross Written Premium (GWP) increased by 19% to SR 1,116 million in 2021, recording the highest premium level in the history of Saudi Re, which supported the building of scale. In the Saudi home market, a 39% growth in GWP was achieved. A promising 15% growth was registered in GWP in Asia, while business from Lloyd’s market grew by 13%. A healthy balance was maintained in the portfolio with international business contributing 57%. The combined result was an increase in the net written premiums by 24%. Total revenues increased by 32.52% from SR 660 million to SR 874 million.

Total comprehensive income for 2017-2021

	2021 (SR ’000)	2020 (SR ’ 000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Net income for the year	38,309	45,918	45,444	13,722	38,888
Other comprehensive income/loss	(2,124)	2,191	(3,021)	3,036	(1,962)
Total comprehensive income	36,185	48,109	42,423	16,758	36,926

2021 witnessed unusual flood events in the Asian book of business and also challenging market practices affecting the performance of the Life book business, which resulted in an increase in the net claims incurred. This had a moderating impact on the growth of the underwriting income, resulting in the net underwriting income increasing by 3.6% to SR 71.63 million.

Key operational ratios for 2017-2021

Ratio	2021 %	2020 %	2019 %	2018 %	2017 %
Premium growth	19	18	10	-23	-4
Retention ratio	85.9	83	82	85	68
Net claims ratio	66.1	61	65	66	70
Net acquisition cost ratio	25.5	29	25	26	23
Technical ratio	91.6	89	90	92	94
G&A expense ratio	7.50	8	8	8	9
Combined ratio	99.1	97	97	100	102

Saudi Re strengthened the loss reserves especially in the Life book of business and also in the Asian book of business which led to an increase in loss ratio of 5% compared with 2020. The latter was affected by exceptionally higher frequency flood claims. The acquisition cost ratio, which was unusually higher in the previous year, has come back to expected average.

9.2 Costs and expenses

Underwriting costs and expenses 2017-2021

	2021 (SR ’000)	2020 (SR ’000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Gross claims paid	(471,216)	(481,191)	(436,701)	(389,327)	(356,661)
Retroceded premiums	61,707	181,476	60,006	24,638	63,396
Net claims incurred	(565,312)	(391,980)	(417,070)	(404,054)	(419,114)
Policy acquisition costs and profit commissions	(232,404	(194,682)	(172,781)	(172,472)	(146,126)
Other underwriting expenses	(5,063)	(4,002)	(3,616)	(1,997)	(4,710)
Total underwriting costs and expenses	(802,779)	(590,665)	(593,467)	(578,523)	(569,950)
Net underwriting income	71,626	69,149	67,244	51,560	37,142

Investment income

	2021 (SR ’000)	2020 (SR ’000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Special commission income from time deposits	5,312	10,729	18,325	5,824	3,649
Realized gain/(loss) on investments held at fair value through income statement	7,209	(885)	13,903	678	1,339
Unrealized gains on investments held at fair value through income statement	4,912	1,685	3,793	3,460	49,948
Special commission income from bonds and sukuk	13,548	11,427	4,156	2,874	2,688
Special commission expense from margin loan	(432)	10	–	–	–
Dividend income	1,092	3,310	1,862	3,419	4,637
Share of profit of equity-accounted investee	18,658	12,072	5,115	2,303	165
Investment management expenses	(3,356)	(889)	(1,675)	(3,920)	(9,451)
Net investment income	46,944	37,439	45,479	14,638	52,975

Saudi Re managed to register a sustained performance over the past five years, with improved profit margins.

In 2021, the net claims incurred increased by 43.71% from SR 391.98 million to SR 561.31 million. This was influenced by reserve strengthening and higher than expected frequency of flood claims. Total underwriting costs and expenses increased by 35.91%. This offset the increase in total revenues to a greater extent and as a result, the net underwriting income increased only by 3.58% to SR 71.63 million.

Other operating income, administrative expenses, and Zakat did not record major changes compared to 2020.

The net income is diversified between the operating income and the investment income in the proportion of 54% and 46%, indicating balance in revenue streams.

9.3 Assets

Assets for the period 2017-2021

	2021 (SR ’000)	2020 (SR ’000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Bank balances and cash	27,807	13,157	13,169	31,886	33,482
Time deposits	243,382	193,459	378,031	270,132	109,753
Accrued special commission income from time deposits	2,310	3,211	7,974	2,080	872
Reinsurance premiums receivable, net	242,230	293,755	233,392	200,024	358,871
Investments held at fair value through income statement	631,608	512,081	417,848	552,574	865,068
Held-to-maturity investments	298,022	184,023	37,500	0	0
Accrued special commission income from bonds, sukuk and held-to-maturity investments	6,810	6,181	2,793	2,664	3,831
Accrued reinsurance premiums	680,470	594,263	467,071	409,778	372,088
Retrocession balances receivable	13,064	29,509	11,744	11,432	14,300
Retroceded share of unearned premiums	67,953	71,862	50,837	33,081	117,679
Deferred excess of loss premiums	12,050	12,784	–	–	–
Retroceded share of outstanding claims	149,333	154,674	282,719	198,433	59,889
Retroceded share of claims incurred but not reported	38,033	45,796	34,812	59,937	105,950
Deferred policies costs	168,598	149,403	106,279	99,896	100,345
Held-to-maturity investments	0	0	0	0	0
Prepaid expenses, deposits and other assets	246,581	289,099	244,640	208,959	104,193
Due from shareholders’ operations	0	0	0	0	0
Property and equipment, net	37,156	33,625	33,576	32,589	33,536
Investment in an equity-accounted investee	142,000	120,141	101,446	97,294	91,954
Statutory deposit	89,100	81,000	121,500	121,500	100,000
Accrued income on statutory deposit	20,962	20,186	17,992	15,549	13,128
Total reinsurance operations assets	3,117,469	2,808,210	2,563,323	2,347,806	2,484,938

Total assets increased by 11.18% to SR 3.12 billion as at 31 December 2021. Saudi Re has generated 239 million in operating cash inflow compared with 15 million in 2020, a growth of 1,598% that has a positive impact in invested assets as well as total assets. There were increases in time deposits, investments held at fair value, held-to-maturity investments, and accrued reinsurance premiums. On the other hand, there were declines in net reinsurance premiums receivable, prepaid expenses, and deposits.

Significantly, there has been an increase in all categories of investments. Saudi Re has demonstrated strong financial flexibility with non-existent leverage and good access to capital markets. Saudi Re’s strong asset quality is demonstrated by its investment portfolio, which minimizes risk. Saudi Re’s asset quality is considered to be on a par with that of an A-rated company.

9.4 Liabilities

Liabilities for the period 2017-2021

	2021 (SR ’000)	2020 (SR ’000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Accounts payable	44,042	31,975	39,929	19,928	16,648
Margin loan payable	56,797	23,117	–	–	–
Retrocession balances payable	48,772	77,220	46,173	22,899	229,764
Accrued retroceded premiums	35,492	39,812	21,741	15,840	7,891
Unearned premiums	648,869	548,541	401,998	380,171	461,489
Outstanding claims	782,991	716,947	737,229	662,467	445,954
Claims incurred but not reported	427,397	350,742	355,255	330,481	415,099
Unearned retrocession commission	17,150	15,805	8,396	6,410	7,542
Accrued expenses and other liabilities	29,897	23,861	19,421	12,547	12,813
Employees’ end of service benefits	12,288	10,673	8,829	6,594	5,729
Provision for Zakat and tax	15,266	15,174	23,742	38,244	37,431
Accrued commission income payable to SAMA	20,962	20,186	17,992	15,549	13,128
Total liabilities	2,139,923	1,874,052	1,680,705	1,511,130	1,653,489

The liabilities increased from SR 1,874 million to SR 2,141 million, an increase of 14.24% following the growth in business by 19%. There have been significant increases in the technical reserves comprising unearned premiums, outstanding claims, and claims incurred but not reported.

9.5 Equity

The paid up share capital of the Company increased to SR 891,000 from SR 810,000. The capital increase occurred through a bonus share issue.

9.6 Net income

Net income from shareholders’ operations and reinsurance operations 2017-2021

	2021 (SR ’000)	2020 (SR ’000)	2019 (SR ’000)	2018 (SR ’000)	2017 (SR ’000)
Net income from reinsurance operations	2,571	3,432	3,518	1,371	(2,828)
Net income from shareholders operations	53,315	60,692	45,444	819	25,454

Details for 2020 and 2021

	2021 (SR ’000)	2020 (SR ’000)	YoY % Change
Total income for the year before Zakat and tax	55,886	64,124	-12.8
Total income attributed to the reinsurance operations	(2,571)	(3,432)	25.1
Net income for the year before Zakat and tax attributable to the shareholders	53,315	60,692	-12.2
Zakat and tax charge for the year	(15,006)	(14,774)	1.6
Net income for the year after Zakat and tax attributable to the shareholders	38,309	45,918	-16.6
Basic and diluted earnings per share for the year	0.43	0.52	-17.3

The reason for the decrease in net profit during the current year compared to the previous year is mainly due to the increase in claims incurred by 44%.

9.7 Dividend Distribution Policy

To achieve suitable returns to the Company’s shareholders in one or more of the following:

1. Distribution of cash dividends to the shareholders taking into consideration the financial position of the Company, solvency margin requirements, available credit lines, and the general economic situation.
2. Stock dividends taking into consideration the requirements and conditions related to retained earnings and other stockholders’ equity in the balance sheet.
3. Shareholders who are registered at the end of trading before the General Assembly at which dividend preeminent is approved will be entitled for the dividends.
4. The Company pays the profits to be distributed to the shareholders at the dates specified by the Board of Directors. According to the Articles of Association of the Company, profits are distributed according to the decision of the General Assembly, and this is done as follows:

• Set aside Zakat and assessed income tax.
• Set aside 10% of the profit to form a statutory reserve and the Ordinary General Assembly may stop this appropriation when the total reserve reaches 30% of the paid-up capital.
• Once determining the stock shares in net profits, the Ordinary General Assembly has the right to form other reserves, to the extent that it achieves the interest of the Company or ensured distribution of fixed profits to shareholders.
• After that, the first payment shall be distributed to the shareholders, with the condition that it is not less than 1% of the paid-up capital.

The Board decided not to distribute cash dividends for 2021.

On 14 July 2021, the Extraordinary General Assembly agreed in its meeting on the following:

Bounce Shares distribution to the shareholders of the Company registered in the Securities Depository Center records at the end of the day of the General Assembly Meeting, at the rate of one share for every 10 shares. The shares were transferred to the accounts of eligible shareholders through the Bank as of 18 July 2021.

The Company has generated SR 239 million in operating cash inflow compared with SR 15 million in 2020, a growth of 1,598% that has a positive impact on invested assets as well as total assets.

9.8 Zakat, income tax-2021, fees, and other charges

Description	Reasons	Paid amount SR ’000	Outstanding amount at end of financial period SR ’000
Zakat and income tax	The Company’s share according to Zakat and tax regulations in the Kingdom	14,913	15,266
WHT	The Company’s share according to Zakat and tax regulations in the Kingdom	3,033	199
VAT	The Company’s share according to Zakat and tax regulations in the Kingdom	43,484	9,638
SAMA fees	Supervision fees for the Central Bank of Saudi Arabia	5,956	3,303
GOSI	Social insurance contributions for Company employees to the General Organization for Social Insurance	2,484	205

9.9 Solvency and rating

As a company licensed by the Saudi Central Bank (SAMA), Saudi Re operates under the supervision of SAMA and is in full compliance with the applicable regulations. The Company maintained a solvency ratio of 163% as at 31 December 2021 and is rated A3 (Stable) by Moody’s.