Financial Analysis

8.1 Prospects and Outlook

Saudi Re continues to demonstrate a robust performance driven by the Company’s long-term strategy and forward-looking approach. The Company leveraged opportunities in its key classes of business and developed revenue streams across domestic and international markets. Saudi Re’s strategic approach involves client-centricity, commitment to market development and diversification, and adherence to sustainable business practices: the success of which was evident in the results of operations and growth in business volumes recorded during the year.

Saudi Re continues to strengthen its position in the local market by supporting the Inherited Defect Insurance (IDI) and maintaining local retention strategy. In addition, the Company plays a pivotal role in supporting Employers Default Insurance and Surety Bond Insurance, further enhancing its contribution to the development of risk management solutions in Saudi Arabia. These strategic offerings align with the evolving regulatory landscape and market needs, positioning Saudi Re as the National Reinsurer to the Kingdom.

As part of its commitment to expanding reinsurance solutions, Saudi Re has signed a Memorandum of Understanding (MoU) with The Saudi Mortgage Guarantees Services Company “Damanat”, aimed at strengthening collaboration in reinsurance. This partnership underscores Saudi Re’s proactive role in supporting contractual and performance guarantees and advancing risk management solutions that contribute to the sustainable growth of the insurance sector.

Saudi Re exhibits its capital adequacy and solvent position via achievement of S&P “A-” credit rating with stable outlook and, “A3” rating from Moody’s with positive outlook. The Company’s credit rating opened additional profitable opportunities in new international markets, especially in Asia. It also enabled the Company to capitalize on international market hardening, which contributed positively to the year’s performance.

Following the Insurance Authority’s introduction of a mechanism, in October 2022, to improve local retention of reinsurance premiums within the Kingdom: Insurance companies are required to cede a share of all their reinsurance treaties, proportional and non-proportional, to the local reinsurance market with effect from 1 January 2023. The cession-share which starts at 20% gradually increased to 25% in 2024, and scaled up to 30% and covering facultative contracts as well.

Saudi Re continues to maintain a well-balanced underwriting portfolio with 41% international business, while keeping focus on risk selection which in turn reflects positively on underwriting performance. Steady growth on the back of business written in other markets, including Asia and the Company’s home market - Saudi Arabia, has positioned Saudi Re for further expansion across the wider region.

As part of carefully executed strategic initiatives to strengthen Saudi Re’s financial position and drive growth, we divested a 49.9% stake in Probitas Holdings (Bermuda) Limited (PHBL), with a total consideration proceed of GBP 123 million. This resulted in a capital gain of X 365.9 million, which positively impacted our 2024 results.

A key achievement this year was finalization of a capital increase through subscription by the Public Investment Fund (PIF). The strategic move was approved by the Capital Market Authority in November 2024 and finalized on 30 December 2024; with proceeds received on 2 January 2025. This increased our capital from X 891 million to X 1,158.3 million, raising X 427.68 million through the issuance of X 26.73 million new shares at X 16 per share.

Both the divestiture and the capital increase are pivotal to our strategic roadmap, aimed at maximizing shareholder value, and ensuring we are well positioned to fund future strategic investments and growth opportunities.

8.2 Market outlook

The global reinsurance market has shown considerable hardening on account of inflation, rising interest rates, reducing retrocession and reinsurance capacities, and geopolitical tensions. Notwithstanding the retrocession capacity shortage, these market conditions have been favourable to Saudi Re and resulted in price correction in certain markets. However, and by virtue of cyclicality, the reinsurance market may possibly soften in the medium term. Saudi Re aims to sustain positive through-the-cycle performance by managing volatility and risk exposures and reinforcing its foothold in high growth and profitable market segments.

The Company plans to capitalize on favourable regulatory and market conditions in its home market, spurred by enforcement of local retention of reinsurance premiums within the Kingdom. This increased retention of reinsurance premiums is expected to develop local content, strengthen the financial stability of the sector, and enable the national reinsurance sector to play a more active role.

8.3 Revenue

Saudi Re maintained a strong 5-year growth momentum with a 24% CAGR increase in GWP, reaching X 2.36 billion in 2024. The IDI, which represents 26% of the Company’s GWP in 2024, is the highest premium on record; holding the Company in good stead for continued growth and expansion.

Gross written premium (IFRS 4)

Reinsurance Revenue reached X 1.13 billion, during the year, marking 80% growth year on year. This performance was driven by growth in all lines of business, leading to a positive outcome in the net reinsurance result. The Company’s net investment income grew substantially, by 629%, and net income after Zakat and Tax increased by 282% to reach X 474.8 million.

Reinsurance highlights (IFRS 17)

Revenue highlights (IFRS 4)

8.4 Reinsurance Revenue

Saudi Re maintains an ongoing strategy to enhance the performance of its business lines, capitalize on upgraded credit ratings, and leverage international market hardening. Strategic actions in line with this overarching plan triggered underwriting penetration into new lines of business enabled the Company to reconsider and improve its reinsurance terms for some business lines.

Reinsurance revenue by lines of business

Reinsurance revenue by geography

Reinsurance service results by line of business

Saudi Re’s underwriting strategy yielded a 19% improvement in the reinsurance service result, with profit across most business lines.

Reinsurance service results by geography

Reinsurance service result improved for Saudi market and maintained a steady position for international business despite the impact of major events such as the UAE floods and Typhoon Yaghi.

Reinsurance service expenses by line of business

Reinsurance service expenses - IFRS 17

Underwriting costs and expenses (2019-2022) – IFRS 4

Net reinsurance finance (expense)/income

Investment income

Investment income increased due to realized profits from selling the Company’s stake in Probitas, as announced during 2024. Investment assets were actively allocated from money market funds into fixed term deposits and fixed income instruments to lock in higher yields for a longer duration. This strategy, in the continuing high-interest environment, led to increased returns from investments in the money market and fixed-income investments.

8.5 Net income

8.6 Comprehensive income

8.7 Assets

The Company’s growth was also reflected in assets, which increased by X 837 million from the previous year. This rise is mainly attributed to improved liquidity, a strengthened investment portfolio, increased insurance activities, enhanced equity investments, and overall financial growth.

8.8 Liabilities

The Company’s total liabilities grew by 26%, owing to business growth during the year.

8.9 Equity

Shareholder equity increased by 41% from X 1.146 billion to X 1.611 billion by the end of 2024; reflecting the Company’s profitability improvement.

8.10 Dividends

Saudi Re announced that its Board of Directors has recommended, on 21 March 2025, to increase the Company’s share capital from X 1,158,300,000 to X 1,698,100,000 through the issuance of bonus shares to shareholders. The capital increase aims to support the Company’s growth and strengthen its financial position.

The increase will be carried out by capitalizing X 539,800,000 from retained earnings, granting 4 bonus shares for every 9 shares owned. Additionally, 2,500,000 shares will be allocated to the Company’s Long-Term Employee Incentive Programme. No cash dividends were distributed during 2024.

Dividend Policy

The Company’s Dividend Distribution Policy depends on the achievement of returns and gains for investors in the Company’s shares where the impact of such returns and gains extends to include the following pillars:

1. Distribution of sufficient cash profits to the Shareholders, after considering the various factors at the time of distribution including the Company’s financial state, working capital requirements, distributable profits, credit limits available to the Company in addition to the overall economic situation.

2. Granting free shares to Shareholders if the conditions and requirements are met with regard to retained profits, Shareholder equity components within the Company’s financial statements and balance sheets.

3. Priority, whether for cash profits or grant shares, shall be given to Shareholders registered in the records of the Depository Center of the Financial Market at the end of the trading day on which the general assembly was convened, upon obtaining the approvals of the concerned authorities.

4. The Company shall pay the profits allocated for distribution to the Shareholders at the times determined by the Board.

8.11 Zakat, taxes, fees, and other charges

8.12 Solvency and rating

Saudi Re continues to strengthen its competitive position through profitable growth and strategic diversification across domestic and international markets. The Company maintains a disciplined approach to risk, keeping exposure to catastrophe and other large-scale risks at moderate levels while ensuring capital adequacy remains above the “AAA” threshold in S&P’s model.

S&P’s stable outlook reflects confidence in Saudi Re’s ability to sustain its excellent capital adequacy and drive profitable expansion in the coming years. The Company’s governance practices are recognized as effective and well-aligned with its strategic objectives, with management expertise and consistency contributing positively to operations.

Moody’s has also reaffirmed Saudi Re’s strong financial standing, reflecting its solid capitalization, prudent underwriting strategy, and sound investment portfolio. The rating agency acknowledges Saudi Re’s key role in the Saudi insurance market, its growing international presence, and its disciplined approach to risk selection. Furthermore, Moody’s has assigned a positive outlook, highlighting the Company’s strengthening market position, continued profitability, and ability to navigate market cycles effectively. This assessment underscores Saudi Re’s resilience and reinforces confidence in its long-term growth prospects.

Saudi Re’s financial strength is underpinned by several key factors:

• A leading market position as Saudi Arabia’s sole professional reinsurer, complemented by an expanding footprint across Asia, Africa, and Lloyd’s.
• A preferential position in the Saudi market, benefiting from the right of first refusal on a portion of premiums ceded by primary insurers.
• Strong asset quality, supported by a conservative and well-diversified investment portfolio.
• Solid capital adequacy, backed by robust capital levels and measured exposure to natural catastrophe risks.
• Strong financial flexibility, with no leverage and seamless access to capital markets, facilitated by its listing on the Saudi Exchange and a broad investor base.
• Saudi Re remains well-positioned to capitalize on market opportunities while maintaining a prudent risk management approach, ensuring long-term value creation for stakeholders.