The Company's robust performance and resilience during challenging times is a testament to the effectiveness of its strategy
Saudi Re has made continuous progress in the “Strategy towards 2026”, which aims at achieving a ranking among the top 50 global reinsurers, by placing its primary focus on its home market, while also expanding and diversifying into international markets
The markets faced yet another turbulent year in 2022, with conflict in Europe hampering global growth prospects, interrupted energy supply, capital markets experiencing high volatility and an increasing threat of inflation. However, the global reinsurance market began to firm up, after a six-year negative spell. Despite a volatile global environment, Saudi Re was able to deliver consistently strong financial results and provide enhanced value to our stakeholders.
5.1 A volatile operating environment
The MENA region is expecting a substantial slowdown in economic activity in 2023, following a period of robust growth in 2022, which was led by the Saudi Arabian economy. Saudi Arabia experienced 8.7% growth in 2022, the highest among the G20 countries.
The insurance market in Saudi Arabia began to improve in 2022, with a turnaround in investor sentiment. Saudi insurers are now required to adopt an adequate pricing strategy for both motor and medical insurance, as they are retaining more risk. Among challenges faced in 2022, were claims resulting from floods in Saudi Arabia and Asia, as well as claims relating to an unexpected mall fire at Dhahran. Additionally, the Company also faced economic hardships, including increased competition and the impact of rising interest rates and currency exchange fluctuation. Despite numerous challenges during the year, Saudi Re was able to deliver a strong performance.
Despite the headwinds facing global economic outlook, the reinsurance market capacity shortage, hardening market and tightened terms are expected to drive further increases in the reinsurance pricing. Overlapping disruptions, financial shocks, geopolitical instability, increased exposure to natural catastrophes all have brought resilience to the forefront, making way for risk transfer and reinsurance solutions.
In spite of the overall economic uncertainty, the local market experienced developments that were favorable to Saudi Re, including local retention mechanism and improved reinforcement of the Inherent Defects Insurance (IDI) program.
On a local front, demand for insurance and reinsurance is expected to continue, given the current economic boom in the Kingdom.
5.2 A strong strategic focus
Saudi Re has made continuous progress in the “Strategy towards 2026”, which aims at achieving a ranking among the top 50 global reinsurers, by placing its primary focus on its home market, while also expanding and diversifying into international markets.
The Company's robust performance and resilience during challenging times is a testament to the effectiveness of its strategic focus. Various key factors have been carefully considered in our strategy formulation, including the evolution of the (re)insurance regulatory landscape, the international reinsurance landscape and global consolidation trends, the Kingdom’s national agenda, and the creation of shareholder value. We have leveraged our competitive advantage in the Saudi market through improved market retention and capitalizing on the growth prospects of the economy.
The Board of Directors recommended increasing the Company’s capital through a rights issue. The SR 445.5 million rights issue will raise the capital from SR 891 million to SR 1.336 billion. The capital increase will strengthen Saudi Re's capital base and support the expansion plans in the domestic and international markets while aligning with Saudi Re's effort to generate better returns and create greater shareholder value.
Prioritizing diversification has remained central to Saudi Re's strategy, aiming to minimize concentration and accumulation risks in its portfolio. To achieve this objective, the Company has expanded into various business lines, maintaining a balance between proportional and non-proportional contracts, while also diversifying geographically. Its portfolio spans over 40 markets in the Middle East, Asia, Lloyd's market, and Africa. In expanding our international footprint prudently, we have been able to demonstrate the effectiveness of our diversification strategy, with international business accounting for 44% of our portfolio in 2022. This signifies Saudi Re’s ability to deploy technical and business development capabilities to build a strong footing in international markets, even during challenging times, in a manner that reinforces profitable growth.
To empower our teams across underwriting, actuarial, analytical, and claims management functions to provide exceptional service to clients, Saudi Re has invested in capability building. In line with our strategy to develop international business, the Company has established strong relationships with partners and brokers outside the home market, projecting Saudi Re as an emerging and reliable Middle Eastern reinsurer.
Moreover, Saudi Re has significantly enhanced communication facilities and data connectivity, as well as strengthened cybersecurity protection to ensure maximum availability of IT services while delivering uninterrupted services to clients.
5.3 Exceptional growth and record achievements in 2022
I am pleased to report that 2022 was an exceptional year for Saudi Re, with outstanding results that demonstrate our strength and resilience as a leading reinsurer in the Middle East and beyond. Our Gross Written Premium (GWP) grew by an exceptional 26% to SR 1,403,281, recording the highest year-on-year growth and marking the highest premium level achieved in our history. This remarkable accomplishment is evidence of our unwavering commitment to providing superior value to our clients and partners, reinforcing our position as one of the top-ranked Middle Eastern reinsurers.
Our total equity increased from SR 963 million to SR 1 billion, while total assets increased by 32% to SR 4.2 billion. We maintained a healthy solvency position and our technical reserves reached SR 1.7 billion as of 31 December 2022. These results demonstrate the strength of our balance sheet and our ability to manage risk efficiently.
Additionally, our efficient business model, improved technical performance and recovery of investment returns have led to sustained profitability over the last seven years. Our net profit increased year-on-year, and we have a track record of profitability that underscores our long-term viability.
We continuously seek to optimize the composition of our investment portfolio, considering factors including risk, return, capital, regulation and tax legislation changes.
In December 2022, S&P Global Ratings assigned Saudi Re an “A-” long-term issuer credit and insurer financial strength rating, with a stable outlook, citing the Company’s profitable business growth, diversification, and strong capital adequacy. Meanwhile, Moody’s affirmed Saudi Re’s “A3” Insurance Financial Strength Rating, also with a stable outlook, in June 2022, highlighting the Company’s strong brand and market position in Saudi Arabia, as well as its growing presence in Asia, Africa, and Lloyd’s. Both ratings reflect Saudi Re’s effective governance practices, consistent strategy, and management expertise, as well as its strong financial position, which supports the Company’s growth efforts in the local and international markets.
Our Gross Written Premium (GWP) grew by an exceptional 26% to SR 1.4 billion marking the highest premium level achieved in our history
5.4 Our commitment to sustainability
As one of the leading reinsurers in the region, we recognize the importance of setting a high standard in sustainability. Saudi Re’s sustainability approach centers around the best interests of our stakeholders and their evolving demands. Furthermore, the framework is aligned with national and international standards such as the United Nations Sustainable Development Goals (UN SDGs) and the Principles for Sustainable Insurance (PSI). As the first Middle Eastern reinsurer to publish a sustainability report, we are committed to setting a benchmark in adopting sustainable practices and voluntarily disclosing our ESG performance. Our goal is to improve the image of the insurance industry in society and demonstrate our commitment to sustainability.
As a Sharia-compliant company, we firmly believe ensuring sustainability requires responsibility in conducting business and investing. We are committed to promoting sustainable practices across our organization, and we will continue to prioritize ESG factors in our decision-making processes.
The recommended capital increase will strengthen Saudi Re’s capital base and support the expansion plans in the domestic and international markets while aligning with Saudi Re’s effort to generate better returns and create greater shareholder value
5.5 Contributing to the Saudi Vision 2030
Saudi Re’s commitment to national development and support of the Saudi Vision 2030 remains steadfast. We actively create opportunities for Saudi citizens through targeted training and development programs, with a special focus on empowering women, and have achieved a Saudization ratio of 60% in 2022.
As the only specialized reinsurer in a rapidly developing market, we play a crucial role in driving professional standards, enhancing product offerings, and filling gaps in insurance coverage. Our efforts align seamlessly with the national agenda, as we actively contribute to the retention of reinsurance premiums within the Kingdom and support national insurance programs, thereby supporting local content development. Additionally, we export reinsurance services in line with the national goal to grow the non-oil Gross Domestic Product (GDP), further underscoring our commitment to national development.
5.6 A robust governance framework
In our efforts to maintain a consistent focus on governance, Saudi Re has taken steps to improve effectiveness of the Board, which was done by contracting a consultant to assess the level and standard of governance among Board members. Recommendations from the assessment were taken into consideration, and the Board made decisions to adopt changes in policies and procedures, and introduce new programs and systems to further strengthen governance practice.
To provide shareholders and the public with more insight into the Company's business activities and better disclosures, the 2022 Annual Report contains extended information following best practices. Additionally, Saudi Re proactively publishes a detailed sustainability report, as it continues to address ESG issues.
The Company also actively monitors changes in regulations and accounting standards to ensure it is well-prepared to handle emerging risks and evolving market trends. This is done through regular assessments using an enterprise risk management framework and a strategic planning framework.
Saudi Re has been working on the adoption of the International Financial Reporting Standard (IFRS) 17, which will be applicable in the Kingdom from the beginning of 2023. The progress made so far and the effect on the financial performance have been included in a separate section in this report and in the financial statements for the purpose of keeping our stakeholders aware of this important transition in the financial reporting.
During 2022, we have conducted a study to assess the effectiveness of our compensations and benefits structure and launched a new reward strategy that is geared to establish a stronger link between reward and performance and help retain and attract talents and incentivize them to achieve Saudi Re’s strategic goals.
Saudi Re has a robust governance structure in place to protect the rights of its shareholders and other stakeholders. It ensures compliance with applicable laws, regulations, and directives issued by regulatory bodies.
5.7 Looking to the future, building on 15 years of progress
As we near our 15th anniversary, we contemplate the progress made by Saudi Re during a tumultuous period, culminating in our present standing as a leading and reliable middle eastern reinsurer. Although Saudi Re has achieved numerous successes, the potential that the company has created is truly commendable and deserving of recognition.
Building on our competitive advantage in the Kingdom, we are poised for exceptional growth opportunities both domestically and in the global arena. We continue to explore a range of organic and inorganic growth opportunities to expand our operations and increase our scale, while maintaining a focus on delivering value to our shareholders. Our long-term strategy is centered on sustainable and diversified growth, and we remain committed to serving the interests of all our stakeholders.
As we approach our 15th anniversary in 2023, we remain optimistic and committed to our vision for the future. I would like to take this opportunity to extend my sincere gratitude to our employees for their unwavering dedication and commitment during these unprecedented times. I am deeply appreciative of the regulatory bodies for their valuable guidance and advice, as well as our investors for their continued trust and support. I am also grateful for the confidence shown by our clients and partners worldwide, who have made this journey possible. We are committed to creating value and serving for all our stakeholders to the very best of our ability in the years to come.
Chairman of the Board of Directors