The Jordanian Insurance Sector

Transcription

1 The Jordanian Insurance Sector June 2011

2 Capital Investments 45 Issam Ajlouni Street, Shmeisani P.O. Box Amman, Jordan Tel: (962) Fax: (962) [email protected] Prepared by: Tarek Yaghmour Vice President, Head of Research Tel: Ext. 327 [email protected] Nawaf Masri Research Analyst Tel: Ext. 478 [email protected] Waleed Kamhieh Intern Tel: Ext. 805 [email protected]

3 TABLE OF CONTENTS BACKGROUND... 4 INDUSTRY STRUCTURE... 5 MARKET CHARACTERISTICS... 6 INSURANCE BUSINESS SEGMENTS... 8 FINANCIAL PERFORMANCE GROWTH DRIVERS TAKAFUL SWOT ANALYSIS COMPANY SNAPSHOTS COMPANY SCORECARDS... 50

4 BACKGROUND The insurance sector in Jordan dates back to the Kingdom s independence in 1946, when the Egyptian Orient Insurance Company affiliated itself with a local agency to provide insurance brokerage services. Five years later, the Jordan Insurance Company was established with an authorized capital of JD100,000, marking the first step in the industry s evolution. As more companies were expected to enter the market, the need for a federation to represent the sector and its growing needs led to the establishment of the Association for Insurance Companies in 1956, which was also held responsible for regulating the sector. The number of players continued to grow, and eventually the first insurance law was passed in In 1984, with a total of 17 insurance providers covering a relatively small market, legislation was passed preventing the issuance of new insurance licenses in an attempt to facilitate organic growth. The Unified Compulsory Insurance Office was created in 1987 and was given the responsibility of insuring all motor vehicles on behalf of insurance companies. The role of this office was to assign a company to every third party liability policy issued, and then allocate them to all insurers equally. Currently there are 28 insurance providers that offer a wide range of life & non-life coverage services. All insurance companies in Jordan, most of which are family controlled, are listed on the Amman Stock Exchange, with the exception of the foreign-listed American Insurance Co. (Metlife Alico). The insurance sector currently employs more than 2,600 people, up from around 2,500 in Number of Insurers in Jordan Source: Jordan Insurance Federation (JOIF) In 1989 the Jordan Insurance Federation (JOIF) was founded by royal decree to replace the Association for Insurance Companies and act as the managing authority for the sector. The year 1995 was a major turning point for the sector when it was reopened to investors with a minimum capital requirement of JD2.0 million. This was considered a low minimum capital requirement and shaped what the insurance industry is today. In an effort to further regulate and supervise the sector, the Insurance Commission (IC) was established as an administratively and financially independent organization in The IC focused on improving insurance companies operational efficiency and on enhancing their ability to provide better services in a healthy competitive environment while also monitoring their solvency and general financial health. The Jordanian Insurance Sector 4

5 INDUSTRY STRUCTURE Source: The Insurance Commission of Jordan (IC) The Jordanian Insurance Sector 5

6 0 1,000 2,000 3,000 4,000 5, Insurance Companies: MARKET CHARACTERISTICS There are currently 28 insurance providers in Jordan with total assets worth JD695 million competing for around JD400 million in gross premiums. Of these 28 companies, 17 provide all types of insurance, 10 offer only non-life insurance and 1 company offers only life insurance. Furthermore, three companies are Shariacompliant insurance (Takaful) providers. Top 10 Insurers by Market Share (2009) Arab Orient Insurance Company 12.2% Jordan Insurance Company 9.0% Arab German Insurance Company 6.9% Middle East Insurance Company 6.4% Jordan French Insurance Company 4.5% Market Size: Gross Written Premiums in Jordan (JD Million) Jordan Int l Insurance Company 4.5% American Insurance Company 4.5% Euro Arab Insurance Group 4.4% AL-Nisr Al-Arabi Insurance Company 4.1% The Islamic Insurance Company 3.9% TOTAL 60.4% Source: IC The Jordanian insurance market is considered highly fragmented, with a Herfindahl-Hirschman Index (a measure of market concentration) of 529, a median market share of 2.8%, and only 4 companies having a market share over 5%. The 7 largest insurance providers accounted for almost half of all premiums in Given these market conditions, net profit margins are characteristically low, with a median of 1.9%. Despite efforts by regulators to encourage consolidation and incentives made available on a case by case basis, no mergers have been completed in over 20 years. Distribution of Jordanian Insurers According to Paid-up Capital 46% 14% 21% 18% > <5 Source: IC After increasing at a CAGR of 14.9% between 2000 and 2009, gross written premiums in Jordan grew by a further 12% in 2010, to reach JD408 million. The overall size of Jordan s insurance market is a fraction of the regional total with premiums representing a mere 2.8% of the overall value. Only Bahrain and Kuwait have smaller markets, with populations that are a quarter the size of Jordan s, underlining the significant potential for growth in the local insurance sector., or non-life, segments account for more than 90% of premiums in Jordan compared to much lower rates of 68% and 55% in Morocco and Egypt. UAE Iran KSA Morocco Egypt Lebanon Algeria Qatar Tunisia Oman Jordan Bahrain Kuwait Insurnce Market Size in Selected MENA Countries in 2009 (USD Million) Non- Source: JOIF Source: Swiss Re The Jordanian Insurance Sector 6

7 , % 1.0% 2.0% 3.0% (JD) Insurance Penetration: Insurance Density Although considered low by global standards, insurance penetration (total premiums as a percentage of GDP) in Jordan, which stood at 2.30% in 2009, is higher than most economies in the region. Jordan s insurance density, a measure of total premiums per capita, was JD61 in 2009, placing it tenth in the region, JD55 of which was attributed to non-life insurance segments and the remaining JD5.8 to life. Jordan ranks fifth in the MENA region by total premiums as a percentage of GDP and second behind Lebanon in non-life. Insurance Penetration in the MENA Region (2009) Insurance Density in Jordan ( ) Lebanon Morocco UAE Jordan Bahrain Tunisia Iran Oman KSA Egypt Qatar Algeria Kuwait Source: Swiss Re Non Source: IC, Capital Investments Aside from low disposable income, which also puts downward pressure on insurance density, Jordan s relatively low GDP per capita also puts the country in a lower rank regionally, in contrast to its higher rank in insurance penetration. Only Tunisia, Algeria and Egypt rank lower for total insurance market density. The main reasons for low insurance penetration rates include the Kingdom s low level of disposable income, religious and cultural attitudes towards insurance, and the lack of public awareness of the availability and benefits of life insurance products. 2.8% 2.5% 2.3% Insurance Penetration in Jordan ( ) UAE Bahrain Qatar Lebanon Oman kuwait KSA Jordan Morocco Tunisia Iran Algeria Egypt Insurance Density in the MENA Region in 2009 (USD) Non- 2.0% Source: Swiss Re 1.8% However, as the economy continues to grow, the level of household wealth will increase and life insurance may become a more attractive and practical way to provide for one s family. Source: IC The Jordanian Insurance Sector 7

8 (JD Million) INSURANCE BUSINESS SEGMENTS There are seven main categories of insurance products and services in Jordan, which are broadly separated into life and non-life sectors. The majority of insurance providers are involved in most insurance businesses, with most segments exhibiting steady growth in the last few years. Source: IC 23.0% Insurance: Distribution of Premiums by Segment (2010) 43.2% Property 12.5% 9.3% 6.0% 4.3% 1.5% 0.1% insurance in Jordan is typically provided in one of three forms; the first is pure life insurance providing a policy that pays a lump sum in the event of death. The second is a combined life insurance policy and investment or retirement plan, which provides coverage against death and maintains a healthy investment portfolio that matures at a certain point in the future. The last form is categorized as group life insurance, which typically caters to the needs of firms that offer life insurance plans to their employees. Despite accounting for only 9.3% of total gross premiums in 2010, the life insurance business is among the most profitable, with a loss ratio a profitability measure that is calculated as the ratio of total claims paid out divided by total earned premiums of 53.2%. After witnessing a slight drop of 2.8% in 2009 as a result of the economic downturn, life premiums grew by 9% in 2010 to reach JD38 million. Nonetheless, this is considered a decent rate for a segment that started from a low base and recorded an average growth of 19.5% between 2006 and Among the major factors that affected life premiums in recent years were the decline in retail banking activities and the mortgage sector in particular, which has negatively affected product lines that are associated with these segments in addition to the sharp decline in equity markets which led to lower sales of investment related insurance products and retirement plans. Nevertheless, life insurance remains one of the segments that have substantial future potential, since life penetration, which currently stands at around 0.2%, is among the lowest in the region. Today, there are 18 players in Jordan that offer life insurance. Metlife Alico, the sole specialized provider in this segment, dominates with a market share of 33.5%, which has been gradually decreasing since 2006 when it had a much larger share of 50%, as its closest competitors made ground. By 2009, Al-Nisr Al-Arabi s (AAIN) market share of life premiums had increased from around 10% to 13.8% and Jordan Insurance (JOIN) also increased its share from around 9% to 17.6% Insurance Premiums Premiums - Market Share (2009), 21.2% ALICO, 33.5% 20 ARIN, 6.6% 10 0 MEIN, 7.3% AAIN, 13.8% JOIN, 17.6% Source: IC Source: IC The Jordanian Insurance Sector 8

9 (JD Million) (JD Milliom) Non- Insurance: insurance by far dominates the Jordanian insurance market, generating JD176.4 million in gross premiums in 2010, equivalent to 43.2% of the total market size. The segment offers two main types of policies: fully comprehensive and motor third party liability coverage (TPL), whereby the insured is covered against loss or damage caused to third parties. insurance is also the most diluted insurance business as a result of the mandatory TPL coverage, with the top 2 companies in terms of market share holding less than 8% each. Premiums - Market Share (2009) TIIC, 5.0% JOFR, 5.1%, 63.2% Insurance Premiums AGICC, 5.5% JOIN, 6.1% AALI, 7.4% Source: IC HOLI, 7.7% 40 0 Source: IC TPL is the cheapest and most popular option among customers, and is the minimum compulsory level of coverage. Furthermore, all insurers are legally required to offer TPL coverage and must do so at a fixed price. This is considered one of the major long term structural issues in the Jordanian insurance sector and will continue to exert pressure on technical profits. In an effort to overcome this issue, the IC introduced new regulations linking TPL insurance to a driver s history whereby insurers are given some flexibility in rewarding motorists with a good driving history and increasing premiums by up to 25% on those with riskier track records. This is expected to slightly improve profitability in coming years, though this issue will continue to be a concern. The IC is also taking steps to eventually float prices and provide more sustainable and competitive policy conditions for insurers. In terms of profitability, the motor segment is one of the least profitable with loss ratios of 86.9% and 92.2% in 2008 and 2009 respectively. Insurance is the second largest segment in Jordan, with premiums totaling JD93.9 million in 2010, making up 23% of the total sector. This business segment mainly caters to the private sector, since public healthcare is usually provided to public sector employees through a number of government-owned insurance schemes. Premiums are floated and are usually calculated using an array of categories including age, gender and medical history. In terms of premiums, medical insurance has been growing steadily over the years at a CAGR of 16.6% between 2001 and 2010 and the long term trend for medical coverage seems to be towards higher volumes Insurance Premiums Source: IC The Jordanian Insurance Sector 9

10 (JD Million) However, the segment has also been suffering from low profitability in recent years on the back of intense competition and low barriers to entry, which has placed pressure on the prices of policies while the costs of medication and medical services were on the rise & Transport Insurance Premiums 20 Premiums - Market Share (2009) AMMI, 5.7%, 37.9% Source: IC MDGF, 5.8% JOFR, 5.9% JOIN, 6.4% AGICC, 10.4% AALI, 27.9% Despite low margins, local insurers cannot afford to limit their exposure to medical insurance as it continues to be a major source of revenue. The segment s loss ratio stood at 91.2% in 2009, up from 83% in the previous year. Moreover, medical insurance is dominated by only two companies, Arab Orient Insurance (AALI) and Arab German Insurance (AGICC), which together accounted for around 40% of gross premiums in Source: IC In accordance with Act 27, all aircrafts in the Kingdom, private and commercial, must be covered by an aviation policy provided by a local insurance company. The only exception is Royal Jordanian, which is allowed to take out an insurance policy with a foreign provider. Total premiums of the marine & transport segment have witnessed noticeable growth since 2001 reaching JD29.3 by the end of However, the segment was hit by the recent global economic downturn as shippers and agents started to cut back. Premiums dropped by 15% and 1.2% in the following two years to stand at JD24.6 million by the end of & Transport Premiums - Market Share (2009) ARSI, 5.2%, 39.8% & Transport JOFR, 6.4% insurance is divided into Cargo and Hull. It is an economically important business, supporting Jordan s ports and trade sectors, yet remains relatively small in absolute volumes, totaling JD21.2 million despite being among the most profitable. The segment s loss ratio stood at only 11.4% and 20.4% in 2008 and 2009 respectively. JIJC, 7.2% Source: IC JERY, 7.5% JOIN, 7.8% AGICC, 10.9% MEIN, 15.2% & Transport also includes Aviation insurance which provides cover for commercial passenger and private aircraft and their cargoes. Total aviation premiums in 2010 amounted to JD3.40 million representing less than 1% of the total market. Middle East Insurance (MEIN) and Arab German Insurance (AGICC) are the top two providers in this segment with market shares of 15.2% and 10.9% respectively in The Jordanian Insurance Sector 10

11 (JD Million) (JD Million) Property, Fire & Damage This segment covers damage to residential, commercial and industrial properties arising from fire and natural disasters and has grown steadily over the years. In 2010 the segment generated premiums of JD50.8 million compared to only JD35.2 million in The IC introduced the Prevention & Self Protection Mandate, which stipulates that entities requesting fire insurance show a certificate proving they have taken measures to prevent the risk of fire before issuing a policy. Insurance The liability insurance segment provides coverage against a wide range of events, typically relating to fraud and theft of cash. It also includes indemnity against professional malpractice lawsuits and public liability, which protects against accidents occurring on public or commercial premises, such as car parks and restaurants. Insurance Premiums 60 Property, Fire & Damage Insurance Premiums Source: IC Source: IC The largest providers of property & fire insurance are Jordan Insurance and Middle East Insurance, with market shares of 18.4% and 10.9% respectively. In 2009, Property, Fire & Damage insurance was the third most profitable segment with a loss ratio of 52.7%. Property, Fire & Damage Premiums - Market Share (2009) This segment is dominated by only three companies, Euro Arab Insurance (AMMI), Jordan insurance (JOIN) and Middle East insurance (MEIN), which together issued around 67% of total policies in this segment. Premiums - Market Share (2009) AMMI, 30.9% JOIN, 18.2% AGICC, 7.5% FINS, 7.5% NAAI, 5.8%, 42.4%, 25.1% AGICC, 8.1% MEIN, 17.7% AALI, 7.5% Source: IC MEIN, 10.9% JOIN, 18.4% & Surety Insurance Source: IC This segment covers loans and provides payment protection to the holder of the loan in case of default. The Jordanian Insurance Sector 11

12 & Surety is the smallest insurance segment in the kingdom, generating around JD0.5 million in premiums in & Surety Premiums - Market Share (2009) ARIN, 32.4% ARAS, 22.9% roughly proportional to the frequency of claims payments, as well as the likelihood and impact of the underlying risk. For example, in motor insurance, only 10% of premiums are ceded to reinsurance, whereas in aviation the rate of reinsurance increases to 90%. Unlike most other regional markets where ceding over 50% of gross premiums to reinsurers is the norm, the Jordanian insurance industry retains around 60% of premiums, as more than 40% are concentrated in the motor segment which, as mention earlier, is known to have the highest retention ratios (91% in 2009). Insurance Retention per Segment (2009) Source: IC JOFR, 44.7% 100% 90% 80% 70% 6% 0% 3% 14% 1% 3% 9% 27% 40% 25% Jordan French Insurance (JOFR), Arab & Accidents Insurance (ARIN), and Arab Assurers (ARAS) are the only three companies that provide & Surety coverage in Jordan. 60% 50% 40% 30% 20% 10% 0% 91% 86% 64% 59% 84% 70% 13% 5% Reinsurance Property Retained Foreign Reinsurance Local Reinsurance There are no standalone reinsurers in Jordan, and reinsurance is provided either by international reinsurers or to a lesser extent by local insurance companies who reinsure one another. Nevertheless, the market does not suffer from capacity scarcity due to the presence of a wide range of regional and international reinsurers, some of whom also own stakes in local companies. Munich Re, AXA, and Allianz, among others, hold strategic shares in Jordan Insurance, Middle East Insurance, and Al-Nisr Al-Arabi Insurance respectively. The size of the market and the uncompetitive taxation system in Jordan are the main reasons why international reinsurers prefer other regional centers, namely Dubai and Bahrain, as a base for their operations in the MENA Region. In the case of local insurers providing reinsurance coverage, it may generate reinsurance premiums at a maximum of 25% of the amount of its regular insurance premiums. The portion of gross premiums to be paid towards reinsurance is outlined by the IC, and closely follows the guidelines set by international agencies such as Moody s and Standard & Poor s. It also varies by segment and is Source: JOIF Premium retention is gradually decreasing however, as other segments with lower retention rates such as marine and fire continue to grow in size. In 2009, 32.3% of premiums were ceded to foreign reinsurers and 8.1% were ceded to local firms. 70% 65% 60% 55% 66% Source: JOIF Premiums Retention in Jordan ( ) 69% 66% 63% 61% 61% 61%60% The Jordanian Insurance Sector 12

13 ALICO JOIN AALI NAAI MEIN AAIN DICL JERY ARIN AIUI JIJC AMMI UNIN GERA GARI PHIN HOLI JOFR FINS AGICC ARSI MDGF TIIC OASI ARAS YINS ARAI ARGR FINANCIAL PERFORMANCE Profitability While the insurance sector was able to record strong top line growth at a CAGR of 14.6% between 2000 and 2010, the same was not true for the sector s profits which experienced high volatility during the same period Source: JOIF Gross Written Premiums vs Technical Profits (JD Million) Premiums Technical Profits Although investment profits, which are typically cyclical in nature, have affected the sector s profitability in recent years, underwriting profits have also weighed on the sector s bottom line as many insurers continue to suffer from operational losses. The sector s combined ratio, a measure of underwriting performance and core profitability, averaged around 95% for all insurers in Jordan between 2003 and This was due to the sector s high claims ratios which resulted from the rapid growth across all segments coupled with, as mentioned earlier, increasing competition and most importantly the crosssubsidization of less profitable business lines such as 120% 100% 80% 60% 40% 20% 0% Source: IC Combined Ratio (Non- Insurance) 24% 27% 25% 21% 13% 13% 14% 15% 13% 11% 10% 79% 81% 82% 76% 78% 79% 80% 82% 85% 83% 89% loss ratio (non-life) Expense ratio (non-life) TPL. Comparatively speaking, the combined ratio of Jordanian insurers is also considered weak by regional and global standards. In 2009, the ratio for Jordanian firms stood at 99.3% compared to an average of 81% for GCC insurers. Moreover, in 2009, only 19 companies had a combined ratio below the critical 100% mark, with the rest posting technical losses. Of those 19, just 7 companies had a ratio below 90% and only below 80%. Metlife Alico and Jordan Insurance (JOIN) are the most profitable with combined ratios of 75.1% and 78.5% respectively. Arab Orient Insurance (AALI) also stands out with a healthy ratio of 84.0% in % 125% 100% 75% 50% 25% 0% Source: IC, Capital Investments Furthermore, contrary to most insurers in more developed markets, Jordanian insurance companies have very high exposure to investment assets including risky equity and real estate markets. This has made investment profits a major source of income for local insurers and caused significant volatility in the sector s bottom line over the years. In some cases such as during 2004 and 2005, investment income represented more than 50% of the sector s bottom line. Asset Quality Combined Ratio per Company Jordanian insurers seem to be slowly reverting to a more conservative asset mix, similar to that in 2003, after a period of high exposure to risky assets which resulted in huge losses during the financial crisis. Highrisk assets including equity and real estate investments comprised more than 62% of total assets in 2005 compared to a much lower level around 38.2% in The Jordanian Insurance Sector 13

14 ALICO AALI JERY AAIN JOIN DICL GARI FINS AIUI MEIN JIJC HOLI NAAI AMMI TIIC ARIN JOFR UNIN PHIN MDGF OASI YINS AGICC ARSI This ratio dropped gradually to 46.4% in the following two years and subsequently to an average of 41% between 2008 and 2009 as insurers increased their exposure to safe investments, including bonds and bank deposits, from 35.3% in 2005 to around 56% by the end of This has helped local insurers reduce their overall asset risk and increase liquidity. Metlife Alico, Arab Orient Insurance (AALI) as well as Al- Nisr Al-Arabi Insurance (AAIN) historically outperformed the market and reported ROE s of 16.6%, 14.4% and 8.2% respectively in 2009, thanks to a conservative investment portfolio as well as a focus on core business lines. Furthermore, heavy reliance on international reinsurers to mitigate underwriting risks beyond domestic capacity will continue to expose Jordanian insurers to foreign credit and currency risks of reinsurance counterparts. 20% 15% 10% Top 10 Insurers in terms of ROE (2009) 100% 80% 60% 40% 4.9% Insurance Sector Asset Mix ( ) 2.0% 10.0% 13.6% 28.3% 28.6% 16.4% 14.0% 5% 0% -5% -10% -15% Source: Company Reports, Capital Investments 20% 40.4% 41.8% 0% Leverage Bank Deposits Bonds Stocks Real Estate Source: Company Reports, Capital Investments Shareholder Returns Jordanian insurers reported a consolidated ROE of 2.0% in 2009, the lowest recorded figure since The period between 2003 and 2005 showed high ROE figures, due to high domestic equity market exposure which translated into extraordinary investment profits. Underwriting Leverage (net premiums written to shareholder funds) stood at 60.6% at the end of 2009 compared to an average of 94% between 2001 and 2003, indicating that insurers have been gradually assuming less underwriting risk in their principal businesses. 120% 90% Underwriting Leverage ( ) 40% 30% Insurance Sector ROE ( ) 60% 30% 0% 20% 10% Source: IC, Capital Investments 0% Source: IC The Equity to Assets ratio, which is a more static measure of leverage, stabilized at around 52% in the past five years after reaching a bottom at 35% in It is worth noting that two of the top three capitalized companies, Al-Barakah Takaful (ARAI) and Al- Manara The Jordanian Insurance Sector 14

15 (%) Insurance (ARSI) are also among the poorest performers. It is also worth noting that Jordan s 3 takaful players, First Insurance (FINS), Al-Barakah Takaful (ARAI), and the Islamic Insurance Company (TIIC), are among the top eight capitalized insurers, as Takaful companies must follow stringent leverage regulations in order to be Sharia-compliant. It must be noted here that the sector s relatively low underwriting leverage figures could turn out to be inadequate after taking into consideration the sector s low level of technical reserves. 60% Total Equity / Total Assets ( ) GROWTH DRIVERS Economic growth: 40% 20% 0% Source: IC, Capital Investments Demand for insurance is highly correlated to Gross Domstic Product (GDP) levels. A rising GDP per capita increases penetration levels as individuals have additional disposable income to spend on protecting their interests. The graph below depicts the relationship between rising GDP levels and insurance premiums in Jordan, using 2000 as a base year. According to the International Monetary Fund (IMF), GDP per capita in Jordan will grow at an average rate of 6.2% between 2011 and 2016; thus presenting an opportunity for the insurance industry to flourish. Technical Reserves Ratio One measure of adequate reserving is the technical reserves ratio (technical reserves expressed as a percentage of net premiums written). The higher the ratio, the better equipped the industry is to address adverse claims performance. Technical Reserve Ratio ( ) GDP vs Insurance Density (Growth) 160% 140% 120% Insurance Density Source: IC, Department of Statistics GDP per Capita 100% 80% Source: IC, Capital Investments Throughout the last decade the technical reserves ratio of the Jordanian insurance sector has been following a downward trend, reaching its lowest point in 2009 at 99.4%, down from around 152% in the year Demographics Jordan has a young population, with almost 37% currently under the age of 15 and close to 68% under the age of 29. This has helped Jordan s population grow at an average of 2.5% per annum during the past 16 years, a rate that will likely continue in the foreseeable future. According to the latest figures released the Department of Statistics, Jordan's population is projected to reach 7.7 million and 9.1 million by 2020 The Jordanian Insurance Sector 15

16 Years and 2030 respectively. The size of the population between the age of 15 and 64 years is also expected to grow at a faster pace in the next decade. Moreover, life expectancy at birth in Jordan has been rising steadily over the years. According to the United Nations, life expectancy is expected to reach 77 years by 2045, up from 72.9 years in Expectancy in Jordan A media campaign during 2009 including advertising through newspapers, hospitals, SMS and s. The highly publicized 10 year anniversary of the IC which also engaged government and private entities. Publishing monthly and semi-annual statistical reports in local, regional and international publications. 60 Legislation & Regulation Source: UNICEF These favorable demographics, together with economic stability, are considered positive for both non-life and life sectors and will present a forward looking opportunity that the insurance industry can cater to. Awareness & Education Limited awareness of insurance products and their benefits among citizens has restricted the growth of the industry as a whole. This has also been partly driven by cultural factors, such as the reliance on the extended family network for protection against adversity, creating an inhibiting environment and making it difficult to change these classic parameters in favor of hedging risk through an insurance policy. With the above mentioned in mind, the IC has initiated a big drive to increase knowledge of insurance products and promote the sector throughout the kingdom. The IC has periodically implemented awareness campaigns built on three key topics: introducing the role of the IC, raising awareness of the benefits of insurance, and introducing various insurance products to the public. The following points summarize the IC s efforts to promote the sector: The link between the development of the insurance industry and the need for a coherent and modern regulatory framework is inherent. A good example is the introduction of compulsory insurance cover, which is a key driver of insurance penetration. The IC is currently considering implementing a compulsory medical insurance scheme for private sector employees as well as earthquake insurance cover for property owners. This move could help shape Jordan s insurance industry in coming years. Compulsory medical insurance should be looked at as a priority since this segment is among the largest and fastest growing business lines in the industry. Another important regulatory issue that has been curbing development in recent years is the sector s low minimum capital requirements which resulted in today s overcrowded market. Encouraging mergers and acquisitions through raising capital requirements or by introducing tax incentives will lead to fewer and stronger companies which will eventually improve insurance density and penetration in the Kingdom. Growth of Financial Services The growth in asset-based financing, such as housing and auto loans, has and will continue to boost the demand for insurance products in order to mitigate the risks associated with the underlying assets. Moreover, the development of local capital markets will provide an alternative source of investments for insurance companies. Although the development of capital markets will not in itself drive demand for The Jordanian Insurance Sector 16

17 JD Million insurance, the maturing of these markets will provide new opportunities for insurance companies to diversify the sources of their investment income. Facilities Extended by Jordanian Banks ( ) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: Central Bank of Jordan Interest Rates and Inflation Although the Central Bank of Jordan has continued to tackle inflation by setting interest rates, average inflation has stood at 4.4% since 1995; with occasional high rates of 6.6% (1996), 6.25% (2006), and 13.9% (2008), making the cost of living difficult to manage for the majority of the population. Insurance is thus viewed less as a necessity and more as a luxury. Inflation in Jordan 17% 14% 11% 8% 5% 2% -1% AVG 4.4% Source: Department of Statistics According to the Economist Intelligence Unit, average inflation in Jordan will rise to levels above 6.0% in 2011 before stabilizing at around 5% in the next 4 years. The Jordanian Insurance Sector 17

18 Taiwan Netherlands UK Hong Kong France Japan USA Canada Malaysia UAE Jordan Indonesia Oman Iran Saudi Arabia Qatar Pakistan Kuwait World 2.5% 2.3% 1.3% 1.2% 1.2% 1.0% 0.8% 0.7% 0.5% 4.4% 8.0% 7.4% 7.0% 11.0% 10.3% 9.9% 13.6% 12.9% 16.8% JD Million TAKAFUL Opportunities: Islamic Insurance (Takaful) in Jordan, while still an industry in its infancy, has been exhibiting tremendous growth relative to conventional insurance in recent years. The Takaful market grew at a CAGR of 21.2% between 2003 and 2010 compared to a much slower rate of 13.2% for the insurance sector as a whole. As a result, the market share of Takaful providers has grown from only 4.8% in 2003 to reach 7.8% by the end of Takaful Market in Jordan 10% 8% 6% 4% 2% 0% Muslim Population: With a population of 6.4 million, of which 94% are Muslims, Jordan is a highly attractive market for Takaful operators, as demand for Takaful products in the Kingdom is expected to grow in the medium to long term, especially among those who do not currently have any type of insurance coverage. Ethical Investments: Profit sharing and the limitations on acceptable investments of Takaful may also be appealing to a wider group of non-muslims seeking ethical financial services and investments. Evidence from existing Takaful markets already supports this claim. In Malaysia for example, non- Muslims account for more than 60% of total Takaful premiums. Takaful Market Market Share Source: Capital Investments, IC There are only three companies underwriting Islamicbased insurance products in Jordan. The Islamic Insurance Company (TIIC), the oldest player in the market, enjoyed a dominant market share of 70% on average prior to 2007, with the remainder going to Al Barakah Takaful (ARAI). However since 2008, both companies have been losing market share to First Insurance (FINS), which captured 14.5% of the Islamic insurance market in its first year of operation. Today First Insurance captures 35% of the Takaful market, leaving Islamic Insurance (TIIC) and Al Barakah Takaful (ARAI) with 47% and 18% respectively. Low Penetration: According to Swiss Re s World Insurance Report in 2009, insurance penetration in Muslim countries in general and in Jordan in particular is very low compared to the global average. In 2009, insurance penetration in Jordan was only 2.3%, compared to a global average of 7.0%. 18% 14% Insurance Penetration in Selected Countries (2009) Takaful products in Jordan exist across nearly all business segments including life, medical, motor, property, and marine., or non-life, Takaful accounted for around 94% of the Islamic insurance market in 2009, with the motor, medical, and property segments generating more than 85% of total premiums. 10% 6% 2% In order to capitalize on the recent success and growth of Takaful in Jordan the following opportunities and challenges must be considered: -2% Source: Swiss Re The Jordanian Insurance Sector 18

19 Growing Islamic Banking: The anticipated growth in Islamic Banking in Jordan should also boost demand for Takaful products through bancatakaful, the Islamic equivalent of bancassurance, whereby Islamic banks generate cross-selling opportunities by bundling banking services together with Takaful products. The average expense ratio of the three Takaful operators in Jordan stood at 93.8% in 2009 compared to an average of 89% for conventional insurers in the kingdom. This is mainly due to the fierce price competition that Takaful players face from conventional players who in many cases benefit from economies of scale. Shortage of Skilled Professionals: Challenges: Limited Sharia Compliant Investment Opportunities: A major challenge for Takaful operators in Jordan is the lack of liquid and high quality Sharia-compliant investment products and the high volatility normally associated with currently available products. The most common investment class for global Takaful operators is investment grade Sukuk. However, the bond market in Jordan is still developing and therefore local firms are forced to invest their funds in riskier equity and real estate markets. There is a lack of qualified and experienced professionals in the fields of Islamic insurance and Sharia law in Jordan, especially in more senior positions, mainly due to the lack of Sharia standardization and the relatively small size of the Takaful industry in the country. With the growth estimates for Takaful remaining optimistic, there is a vital need to invest in training and retaining skilled professionals. Lack of Awareness: Lack of awareness presents one of the greatest challenges to the development and growth of the Takaful industry in Jordan. Low Profitability: Jordanian Takaful providers rank lower than their conventional peers in terms of profitability as measured by their expense ratio. For decades, many Jordanians have believed that conventional insurance, particularly life insurance, is not in accordance with the principles laid down by Sharia laws and as a result, awareness of the benefits of different insurance products remained relatively low. 95% 90% 85% Expense Ratio Takaful vs Convensional Insurance 94% 94% 86% 89% However, steps taken by the government to make certain insurance segments compulsory, such as motor and health, will help raise awareness of various Takaful and conventional insurance products. 80% Takaful Conventional Source: Capital Investments The Jordanian Insurance Sector 19

20 SWOT ANALYSIS Strengths: Weaknesses: Well established sector. Steadily growing market. Healthy economic growth. Favorable demographics. Growing financial services sector. Independence of supervisory bodies. Qualified and experienced staff. Advanced IT systems. Low acquisition ratio. Alternative Dispute Resolution mechanism. Small market size. Highly fragmented market. Low capitalizations. Low margins due to fierce competition. Mandatory TPL coverage. Low GDP per capita & disposable income. Lack of public awareness. Shortage of Shariah scholars with appropriate experience. Lack of specialist firms. High reliance on investment profits. Shortage of actuarial skills. High unemployment rates. Uncompetitive tax environment. Opportunities: Threats: Very low insurance density. Growing interest in Takaful. Technological developments in the local insurance market. Growing foreign investments in Jordan. Jordan s relative political stability. Sector is ripe for consolidation. Specialized firms. New social security regulations capping retirement salaries could increase demand for life insurance. Increased preference for Takaful over conventional insurance. New and existing competitive regional insurance centers. Changing socio-economic conditions. Loss of talent to better paying regional competition. High inflation rates. Slowing economic growth Regulation Changes. The Jordanian Insurance Sector 20

21 Company Snapshots The Jordanian Insurance Sector 21

22 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Al Barakah Takaful (ARAI) Background: Al Barakah Takaful, formerly Arab American Takaful Insurance, was established in 1996 and provides a wide range of non-life insurance products and services in accordance with Islamic Sharia principles. The company also invests in other Sharia-compliant companies. Recent Performance: The year 2010 was another tough year for ARAI despite the growth in the company s gross written premiums which recorded an increase of 18% YoY. ARAI s combined ratio stood at 123% in 2010 which resulted in a net loss of JD1.3 million for the year. Price (JD) 0.40 Market Cap (JD m) 2.80 Shares Outstanding (m) 7.00 Avg. Daily Volume 160, week Low/High (JD) 0.35/1.28 ARAI.AM ARAI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 0.37 Dividend Yield 0.0% Haidar Al- Majali 30% Al-Hakiba Real Estate 12% Zuhair Al- Khashman 8% 45% Arab Jordan Investment Bank 5% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 101.9% 91.8% Expense Ratio 40.9% 30.8% Combined Ratio 142.8% 122.7% ROaA -27.8% -19.0% ROaE -49.8% -20.7% Investment Yield 22.8% -1.8% Technical Reserves / Total Equity 80.8% 50.2% Technical Reserve Ratio 79.2% 65.1% Underwriting Leverage 102.1% 77.2% Retention ratio 93.3% 91.2% The Jordanian Insurance Sector 22

23 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Al Manara Insurance (ARSI) Background: Al-Manara Insurance, formerly Arabian Seas Insurance Company, was founded in 1974 with JD0.15 million in paid-up capital. ARSI is a non-life insurance provider that is 76.7% owned by the Global Investment House. Recent Performance: Despite substantial growth in gross written premiums which increased the company s market share from 1.7% in 2009 to 2.5% in 2010, ARSI continued to suffer underwriting losses with a combined ratio of 112% for the year. ARSI recorded a net loss of JD0.45 million in 2010 compared to a loss of JD1.6 million in the previous year. Price (JD) 0.37 Market Cap (JD m) 7.77 Shares Outstanding (m) 21.0 Avg. Daily Volume 7, week Low/High (JD) 0.30/0.45 ARSI.AM ARSI JR Insurance Market Business share: Segment It increased its total market share from 1.7% in 2009 to 2.5% in Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 0.59 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital % Rashed Al- Nouaimi 4% Omar Hammoh 4% Global Mena Macro Fund 76% Loss Ratio 77.2% 87.0% Expense Ratio 27.7% 24.9% Combined Ratio 105.0% 111.9% ROaA -8.3% -2.3% ROaE -11.3% -3.4% Investment Yield -8.8% 3.6% Technical Reserves / Total Equity 24.0% 46.0% Technical Reserve Ratio 77.8% 74.8% Underwriting Leverage 30.9% 61.5% Retention ratio 69.4% 79.7% The Jordanian Insurance Sector 23

24 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Al-Nisr Al-Arabi Insurance (AAIN) Background: Al-Nisr Al-Arabi Insurance was founded in 1976 by Societe Nationale D Assurances (now Allianz-SNA) and is one of the leading insurers in Jordan with business activities that include the full range of and non-life products. May 2006 witnessed a major step for Al-Nisr Al-Arabi through a Strategic Partnership with the Arab Bank, whereby the bank acquired a majority stake in Al-Nisr. Recent Performance: AAIN was able to increase its market share to 4.4% in 2010, up from 4.1% in 2009, after gross written premiums recorded a growth of 20.4%. This was also reflected in the company s technical profits which increased from JD1.3 million to JD1.5 million during the same period. Price (JD) 3.04 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume week Low/High (JD) 2.58/3.50 AAIN.AM AAIN JR Market share: It is one of the larger providers, capturing 4.4% of overall sector market share in 2010, up from 4.1% in Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) 22.9 P/B (x) 1.57 Dividend Yield 3.3% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Arab Bank 50% 12% InvestBank 5% Allianz Mena Holding 18% Sabella Family 15% Loss Ratio 59.4% 59.7% Expense Ratio 25.9% 26.1% Combined Ratio 85.3% 85.8% ROaA 4.7% 3.8% ROaE 8.2% 7.0% Investment Yield 4.9% 3.6% Technical Reserves / Total Equity 60.8% 74.5% Technical Reserve Ratio 116.8% 117.6% Underwriting Leverage 52.0% 63.3% Retention ratio 64.5% 67.4% The Jordanian Insurance Sector 24

25 American Insurance Co. Background: US-based Metlife Alico, a leading multinational insurance company, opened its first branch in Jordan in 1958, and is currently the only life specialist in the market. The company still dominates the life insurance business with a 33.5% market share in Recent Performance: Metlife Alico maintained its rank among the most profitable insurance companies in the Kingdom during 2009 with an ROaE of 16.6% after it reported a net income and a technical profit of JD5.35 million and JD3.5 million respectively. Price (JD) N/A Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 52-week Low/High (JD) N/A N/A N/A N/A N/A N/A Gross Written Premiums N/A Net Written Premiums N/A N/A Net Claims Paid N/A N/A Total Cost of Claims N/A N/A Net Income 5.25 N/A Technical Profit 3.49 N/A Investment Profit N/A N/A P/E (x) N/A P/B (x) N/A Dividend Yield N/A Total Assets N/A Total Investments N/A Technical Provisions N/A Total Shareholders Equity N/A Paid up Capital 4.00 N/A Metlife Alico 100% Loss Ratio 64.8% N/A Expense Ratio N/A N/A Combined Ratio N/A N/A ROaA 6.2% N/A ROaE 16.6% N/A Investment Yield N/A N/A Technical Reserves / Total Equity 143.2% N/A Technical Reserve Ratio N/A N/A Underwriting Leverage N/A N/A Retention ratio 91.7% N/A The Jordanian Insurance Sector 25

26 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Arab German Insurance (AGICC) Background: Arab German Insurance Company was established in 1996 and offers all classes of life and non-life insurance and reinsurance products and services in Jordan and abroad. The Company has one wholly owned subsidiary, Care Now Company, and holds majority stake in Al-Basma Investment Company (95%). Recent Performance: AGICC recorded a growth of 13% in its top line during 2010 and returned to profitability after 2 years of consecutive losses. Moreover, the company maintained its rank as the third largest underwriter in Jordan after Arab Orient and Jordan Insurance with a market share of 7% in Price (JD) 0.78 Market Cap (JD m) 8.11 Shares Outstanding (m) Avg. Daily Volume 72, week Low/High (JD) 0.70/1.64 AGICC.AM AGICC JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) 21.4 P/B (x) 0.86 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Al- Raimouny Family 44% 41% Abdulamir Family 7% Rudain Kawar 5% Ra'ad Al- Jorani 3% Loss Ratio 75.9% 68.5% Expense Ratio 26.9% 24.9% Combined Ratio 102.8% 93.4% ROaA -3.1% 1.1% ROaE -10.6% 4.1% Investment Yield 12.3% 1.4% Technical Reserves / Total Equity 75.1% 93.1% Technical Reserve Ratio 52.1% 48.3% Underwriting Leverage 144.2% 192.9% Retention ratio 51.5% 63.6% The Jordanian Insurance Sector 26

27 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Arab Jordanian Insurance (ARGR) Background: Established in 1996, Arab Jordanian Insurance Group provides a wide range of life and non-life insurance products and services. Recent Performance: Gross written premiums dropped by 22% in 2010 to reach JD7.44 million compared to JD9.58 million in Accordingly, ARGR s market share fell from 2.6% to 1.8% during the same period. Moreover, the company reported a net loss of JD3.3 million in 2010 compared to a loss of JD4.4 million in the previous year. ARGR also continued to report underwriting losses with the company s Technical loss standing at JD1.84 million by the end of Price (JD) 0.51 Market Cap (JD m) 5.10 Shares Outstanding (m) Avg. Daily Volume 488, week Low/High (JD) 0.50/1.17 ARGR.AM ARGR JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 1.93 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Arab Al-Jamil for Insurance Investment Group 8% 9% Jordan Commercia l Bank 10% Mohammed Al- Harahsheh 13% 60% Loss Ratio 120.3% 101.7% Expense Ratio 36.8% 24.3% Combined Ratio 157.1% 126.1% ROaA -31.9% -28.4% ROaE -53.9% -76.6% Investment Yield 2.1% -19.1% Technical Reserves / Total Equity 91.3% 184.8% Technical Reserve Ratio 73.7% 83.7% Underwriting Leverage 124.0% 220.8% Retention ratio 76.6% 78.4% The Jordanian Insurance Sector 27

28 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Arab & Accident Insurance (ARIN) Background: Arab & Accident Insurance Company was established in 1980 and provides all classes of life and non-life insurance products. The Company operates a network of four branches in Jordan and has two branches in Palestine. Recent Performance: Gross written premiums declined by 8% in 2010 to stand at JD12.8 million. However, ARIN s bottom line increased from just JD 0.04 million to JD0.49 million on the back of a significant improvement in investment profits. Moreover, in April 2011, ARIN s general assembly approved the BOD s recommendation to distribute a JD0.05 cash dividend. Price (JD) 0.90 Market Cap (JD m) 7.20 Shares Outstanding (m) 8.00 Avg. Daily Volume week Low/High (JD) 0.75/1.17 ARIN.AM ARIN JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.72 Dividend Yield 5.6% Tantash Family 17% Al-Said Limited 10% Al-Ahleia Insurance Co. Dirar Al- 26% Ghamen 7% 40% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 71.7% 59.0% Expense Ratio 20.8% 32.8% Combined Ratio 92.5% 91.7% ROaA 0.2% 2.1% ROaE 0.4% 5.0% Investment Yield 0.3% 1.8% Technical Reserves / Total Equity 107.9% 92.8% Technical Reserve Ratio 101.6% 91.1% Underwriting Leverage 106.2% 101.8% Retention ratio 72.0% 78.9% The Jordanian Insurance Sector 28

29 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Arab Orient Insurance (AALI) Background: Arab Orient Insurance, Jordan s largest insurer by in terms of premiums, was established in 1996 and provides non-life insurance and reinsurance products. In February 2011, AM Best upgraded the financial soundness and credit ratings of AALI to B++ and bbb respectively. Moreover, in March 2011, AALI distributed a 16.7% stock dividend, raising the company s capital to JD17.5 million. Recent Performance: AALI continued with its strong performance, reporting double digit growth in both net income and technical profits. AALI also reported an improvement in its ROaE which stood at 16.5% by the end of 2010, up from 14.4% in the previous year. Price (JD) 1.50 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 144, week Low/High (JD) 1.27/1.54 AALI.AM AALI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) 8.60 P/B (x) 1.32 Dividend Yield 0.0% Gulf Insurance Co. 89% 5% Mohammed Walid Mukahel & Omar Partners Olayan Co. 5% 1% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 61.4% 63.0% Expense Ratio 22.6% 20.9% Combined Ratio 84.0% 83.8% ROaA 6.1% 6.6% ROaE 14.4% 16.5% Investment Yield 4.2% 5.2% Technical Reserves / Total Equity 79.7% 99.6% Technical Reserve Ratio 73.9% 77.9% Underwriting Leverage 107.9% 128.0% Retention ratio 41.1% 47.9% The Jordanian Insurance Sector 29

30 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Arab Union Int l Insurance (AIUI) Background: Established in 1985, Arab Union International Insurance provides non-life insurance and reinsurance products and services. Recent Performance: Gross written premiums grew by an impressive 64% in 2010 to reach JD14.0 million, increasing AIUI s market share from only 2.3% in 2009 to around 3.4% in However, the company s underwriting performance has declined steadily in recent years. Nonetheless, net income surged in 2010 on the back of a JD3.82 million profit from investments in associates. In May 2011 AIUI distributed a JD0.10 cash dividend. Price (JD) 2.56 Market Cap (JD m) Shares Outstanding (m) 6.00 Avg. Daily Volume 6, week Low/High (JD) 1.30/2.69 AIUI.AM AUIU JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) 4.15 P/B (x) 1.51 Dividend Yield 3.9% Zuhair Khalil Saleem 6% Awamleh Hamdan Family 8% 22% Foti Khamis 9% Yousef Radwan Syrian 4% Insurance Co. 10% Al-Safwa for Financial Inv. 4% 37% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 75.5% 82.8% Expense Ratio 17.0% 13.0% Combined Ratio 92.5% 95.8% ROaA 1.6% 19.4% ROaE 3.4% 44.6% Investment Yield -0.1% 23.3% Technical Reserves / Total Equity 104.2% 108.8% Technical Reserve Ratio 93.9% 88.0% Underwriting Leverage 110.9% 123.7% Retention ratio 85.0% 89.8% The Jordanian Insurance Sector 30

31 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Delta Insurance (DICL) Background: Established in 1976, Delta Insurance Company provides most life and non-life insurance products and services. DICL was one of the smallest three insurers by gross premiums in Jordan during 2010 with a market share of 1.5%. Recent Performance: Despite the company s small size, DICL was able to increase its top line in 2010 by 16.7% and report a positive technical profit. Combined ratio stood at 82% in 2010 compared to 85% in the previous year, a competitive figure compared to other similarly-sized insurers. Moreover, in April 2011, the company distributed a JD0.1 cash dividend for the year Price (JD) 1.69 Market Cap (JD m) Shares Outstanding (m) 8.00 Avg. Daily Volume 16, week Low/High (JD) 1.61/1.85 DICL.AM DICL JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 1.33 Dividend Yield 5.9% Libano- Integrated Suisse Investment Insurance & Co. Industries 17% Co. 12% Zaki Noursi Michael 18% Pharonn 11% Elia Nuqul and Sons Co. 10% 32% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 53.6% 50.2% Expense Ratio 31.8% 31.8% Combined Ratio 85.4% 82.0% ROaA 4.0% 2.1% ROaE 5.8% 3.0% Investment Yield 5.5% -2.4% Technical Reserves / Total Equity 21.4% 22.5% Technical Reserve Ratio 94.6% 83.2% Underwriting Leverage 22.6% 27.1% Retention ratio 41.9% 45.1% The Jordanian Insurance Sector 31

32 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Euro Arab Insurance (AMMI) Background: Established in 1996 as Amman Insurance Company, with JD2 million in paid up capital, Euro Arab Insurance Group offers life and non-life insurance. In February 2011 S&P reaffirmed its BB+ long-term counterparty credit and insurer financial strength rating. Recent Performance: Gross written premiums declined by more than 9% in 2010 to stand at JD14.8 million. As a result AMMI s market share dropped from 4.5% in to 3.6% during the same period. Lower premiums also weighed on underwriting profits pushing AMMI s combined ratio above the critical 100% mark and resulting in the company s first loss since Price (JD) 0.98 Market Cap (JD m) 7.84 Shares Outstanding (m) 8.00 Avg. Daily Volume 5, week Low/High (JD) 0.59/1.15 AMMI.AM AMMI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 0.93 Dividend Yield 0.0% Kamsal Trading & Investment Co. 86% 6% National Express 3% Fouad Bajjali 5% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 76.7% 84.5% Expense Ratio 18.4% 17.0% Combined Ratio 95.1% 101.4% ROaA 0.8% -3.1% ROaE 1.8% -7.3% Investment Yield 4.5% 5.3% Technical Reserves / Total Equity 89.1% 95.7% Technical Reserve Ratio 66.5% 72.2% Underwriting Leverage 133.9% 132.4% Retention ratio 74.3% 75.2% The Jordanian Insurance Sector 32

33 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 First Insurance (FINS) Background: Established in 2006 with JD24 million in paid up capital, First Insurance Company provides non-life insurance products and services in accordance with Islamic principles (Takaful). Recent Performance: FINS' bottom line witnessed a 51% drop during 2010 mainly due to lower investment profits during the year which fell from JD1.66 million in 2009 to JD1.05 million in However, operating performance continued to improve with the company s combined ratio decreasing from around 100% to 95% during the same period. Price (JD) 0.82 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 102, week Low/High (JD) 0.75/0.93 FINS.AM FINS JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.77 Dividend Yield 3.7% Al- Soumoud for Investment 26% Al- Mouazara for Investment 25% First Finance Co. 15% Solidarity Group 6% 28% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 58.4% 65.4% Expense Ratio 41.3% 30.0% Combined Ratio 99.7% 95.3% ROaA 3.5% 1.7% ROaE 3.9% 1.9% Investment Yield 7.1% 4.4% Technical Reserves / Total Equity 5.5% 7.6% Technical Reserve Ratio 52.6% 49.0% Underwriting Leverage 10.5% 15.5% Retention ratio 31.2% 35.1% The Jordanian Insurance Sector 33

34 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Arabia Insurance (GARI) Background: One of the longer established insurers, in operation since 1975, Arabia Insurance provides life and non-life insurance products and services. Recent Performance: GARI was able to maintain its market share of 2.7% during 2010 after underwriting JD11.1 million in insurance policies. Moreover technical profits grew by more than 130% during the year to reach JD0.35 million with the company s combined ratio dropping from around 97% in 2009 to 94% by the end of Price (JD) 0.67 Market Cap (JD m) 5.36 Shares Outstanding (m) 8.00 Avg. Daily Volume 102, week Low/High (JD) 0.75/0.95 GARI.AM GARI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) 30.6 P/B (x) 0.53 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Arabia Holding Co. 51% 27% Ahli Bank 10% Shores Hotels & Touristic Resorts Co. 6% Al-Raja' for Investment s 6% Loss Ratio 59.0% 60.5% Expense Ratio 37.9% 33.5% Combined Ratio 96.9% 94.1% ROaA 2.5% 1.0% ROaE 4.2% 1.7% Investment Yield 7.0% 5.3% Technical Reserves / Total Equity 43.8% 52.7% Technical Reserve Ratio 105.4% 96.2% Underwriting Leverage 41.6% 54.8% Retention ratio 42.1% 50.3% The Jordanian Insurance Sector 34

35 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Gerasa Insurance (GERA) Background: Established in 1997, Gerasa Insurance Company provides almost all classes of insurance and reinsurance products and services except. The Company operates through its head office in Amman and a branch in Irbid, Jordan. Recent Performance: With gross written premiums falling from JD2.37 million in 2009 to only JD0.2 million in 2010, GERA maintained its position as the smallest insurer in Jordan capturing a slight 0.1% of the total market compared to 0.6% in As a result, the company s combined ratio increased from around 97% in 2009 to 179% in Price (JD) 1.00 Market Cap (JD m) 4.00 Shares Outstanding (m) 4.00 Avg. Daily Volume week Low/High (JD) 1.00/1.53 GERA.AM GERA JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 2.10 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Al-Kalouti Family 49% 18% Abu-Sido Family 33% Loss Ratio 76.4% 128.8% Expense Ratio 20.4% 50.3% Combined Ratio 96.8% 179.1% ROaA -13.8% -15.1% ROaE -32.4% -30.7% Investment Yield -16.3% -0.5% Technical Reserves / Total Equity 97.4% 66.3% Technical Reserve Ratio 108.3% % Underwriting Leverage 90.0% 4.3% Retention ratio 88.6% 41.3% The Jordanian Insurance Sector 35

36 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Holy Land Insurance (HOLI) Background: Holy Land Insurance was established in 1980, and is engaged in the provision of non-life insurance products and services excluding medical insurance. The Company operates through 11 branches in Jordan. Recent Performance: HOLI s top line fell by 15% in 2010, dropping the company s market share from 3.3% in 2009 to 2.5%. Lower premiums also weighed on profitability with HOLI s combined ratio increasing from 99% to around 100% by the end of 2010 and resulting in a technical loss on JD0.05 million for the year. Price (JD) 0.98 Market Cap (JD m) 3.92 Shares Outstanding (m) 4.00 Avg. Daily Volume 4, week Low/High (JD) 0.90/1.12 HOLI.AM HOLI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 1.24 Dividend Yield 0.0% Al- Muthaffar Arab Family Assurers 25% 7% Nadim Al- Fardous Al- Twal Moaqat 8% 5% Al-Alami Family 8% Ibrahim Al- Daoud 9% 38% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 84.1% 87.2% Expense Ratio 14.9% 13.2% Combined Ratio 99.0% 100.4% ROaA 0.8% -4.0% ROaE 3.0% -15.6% Investment Yield 4.2% 4.5% Technical Reserves / Total Equity 221.8% 212.8% Technical Reserve Ratio 72.6% 68.6% Underwriting Leverage 305.4% 310.3% Retention ratio 94.7% 95.3% The Jordanian Insurance Sector 36

37 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Jerusalem Insurance (JERY) Background: Established in 1975, Jerusalem Insurance Company provides all classes of life and non-life insurance and reinsurance products and services. The company also holds a 98.69% stake in Jerusalem Company for Maintenance & Structure Building. Recent Performance: 2010 was another good year for JERY with gross written premiums and technical profits growing by 8% and 14.5% respectively. However, the company s ROaE edged lower to 8.2% compared to 9.2% in 2009 on lower investment profits during In April 2011, JERY distributed a JD0.07 cash dividend. Price (JD) 1.85 Market Cap (JD m) Shares Outstanding (m) 8.00 Avg. Daily Volume week Low/High (JD) 1.81/2.52 JERY.AM JERY JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 1.32 Dividend Yield 3.8% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Ilyan Family Zurub 39% Family 43% 26% 27% Ehab Al-Masri Jumean Family 11% 28% JOFICO Pension Fund 7% Jordan Alwasel for Armed Trading & Forces Investment 6% 7% Al Mashriq Insurance Company 6% Loss Ratio 63.1% 59.5% Expense Ratio 27.1% 29.3% Combined Ratio 90.2% 88.8% ROaA 4.8% 4.3% ROaE 9.2% 8.2% Investment Yield 6.0% 4.5% Technical Reserves / Total Equity 60.7% 64.7% Technical Reserve Ratio 99.6% 94.2% Underwriting Leverage 61.0% 68.7% Retention ratio 63.8% 68.3% The Jordanian Insurance Sector 37

38 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jordan Emirates Insurance (OASI) Background: Jordan Emirates Insurance, formerly Oasis Insurance, was incorporated in 1980 and currently underwrites all classes of insurance except life. In June 2009, OASI became a subsidiary of Al- Sagr National Insurance Company, a UAE based insurance and investment group. Recent Performance: In 2010, the newly acquired company succeeded in reporting its first profit since 2006, driven by noticeable operational and managerial improvements. Gross written premiums grew by an impressive 86% to stand at JD11.7 million while technical profits reached JD0.37 million compared to a loss of JD0.27 in the previous year. Price (JD) 0.75 Market Cap (JD m) 3.75 Shares Outstanding (m) 5.00 Avg. Daily Volume 76, week Low/High (JD) 0.59/0.89 OASI.AM OASI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.74 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital % Al Sagr National Insurance Co 86% Loss Ratio 70.7% 73.5% Expense Ratio 37.1% 22.1% Combined Ratio 107.8% 95.6% ROaA -3.0% 1.5% ROaE -7.5% 3.2% Investment Yield 4.6% 1.7% Technical Reserves / Total Equity 70.3% 83.6% Technical Reserve Ratio 73.7% 48.2% Underwriting Leverage 95.4% 173.6% Retention ratio 74.8% 75.9% The Jordanian Insurance Sector 38

39 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jordan French Insurance (JOFR) Background: Jordan French Insurance Company was established in 1976 and offers all kinds of life and non-life insurance products. Recent Performance: Although gross written premiums have grown at 7.5% and 1.5% in 2009 and 2010 respectively, JOFR has been losing market share in recent years. The company has underwritten 4.1% of total policies in the Kingdom during 2010, down from 4.5% in the previous year. As for profitability, JOFR s combined ratio witnessed a marginal improvement during 2010, dropping to 95%, down from 99% in Price (JD) 0.58 Market Cap (JD m) 5.27 Shares Outstanding (m) 9.10 Avg. Daily Volume 11, week Low/High (JD) 0.50/0.66 JOFR.AM JOFR JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.87 Dividend Yield 0.0% Ehab Zurub Jumean Family 11% 43% JOFICO Pension Fund 7% Jordan Armed Forces 6% Al Mashriq Insurance Company 6% 27% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 77.5% 65.8% Expense Ratio 21.6% 29.3% Combined Ratio 99.1% 95.1% ROaA 0.1% 0.4% ROaE 0.4% 1.2% Investment Yield 17.6% 4.7% Technical Reserves / Total Equity 99.4% 82.1% Technical Reserve Ratio 57.3% 41.8% Underwriting Leverage 173.4% 196.4% Retention ratio 71.0% 70.9% The Jordanian Insurance Sector 39

40 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jordan Insurance (JOIN) Background: Jordan Insurance, established in 1951, is the oldest insurer in the Kingdom and provides all classes of life and non-life insurance. JOIN also operates in Kuwait, Saudi Arabia and the UAE. Munich RE, one of the world's leading reinsurers, owns 10% of the company s capital. In 2011, Euromoney named JOIN The Best Insurance Company in Jordan and A.M. Best upgraded JOIN s credit rating to bbb+ from bbb. Recent Performance: JOIN maintained its position as Jordan s second largest underwriter in 2010 with a market share of 10.5%. As for profitability, JOIN s combined ratio increased from 78.5% to around 83% in Price (JD) 2.48 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 1, week Low/High (JD) 2.09/2.75 JOIN.AM JOIN JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 1.64 Dividend Yield 4.6% Bdeir Family 28% Munich Re 10% Al-Masira Investment Co 7% Mithqal, Shawkat & 40% Sami Asfour Co. 6% Khaldoun Abu- Hassan SSC 6% 3% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 51.4% 53.7% Expense Ratio 27.1% 29.1% Combined Ratio 78.5% 82.8% ROaA 4.4% 4.4% ROaE 6.8% 6.7% Investment Yield 1.5% 1.6% Technical Reserves / Total Equity 29.9% 35.5% Technical Reserve Ratio 76.7% 78.0% Underwriting Leverage 39.0% 45.5% Retention ratio 47.2% 48.2% The Jordanian Insurance Sector 40

41 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jordan Int l Insurance (JIJC) Background: Jordan International Insurance, a member of Jordan International Investment Group, was established in 1996 and provides a wide range of life and non-life insurance and reinsurance products. Recent Performance: Gross written premiums fell by 5.7% in 2010, dropping JIJC s market share from 4.5% in 2009 to 3.8%. As a result, technical profits decreased by 25.7% in 2010 to stand at JD0.52 million compared to JD0.70 million in the previous year. Investment income, which slumped from JD1.4 million to JD0.33 million, also weighed on JIJC s profits for the year with the company s bottom line ending 2010 down by 63% at JD0.26 million. Price (JD) 0.63 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 5, week Low/High (JD) 0.53/0.66 JIJC.AM JIJC JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.52 Dividend Yield 0.0% Gammoh Family Jordan Int'l Inv. Group 9% 12% SSC 10% Abu-Jaber Family 11% Fahd bin Muhammad 50% bin Saleh 4% Mazen Darwazeh 4% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 81.5% 85.7% Expense Ratio 12.7% 10.2% Combined Ratio 94.1% 96.0% ROaA 2.0% 0.8% ROaE 3.2% 1.2% Investment Yield 5.1% 1.3% Technical Reserves / Total Equity 37.4% 31.8% Technical Reserve Ratio 67.6% 68.1% Underwriting Leverage 55.2% 46.8% Retention ratio 75.1% 66.4% The Jordanian Insurance Sector 41

42 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Middle East Insurance (MEIN) Background: Middle East Insurance, one of the leading insurers in Jordan in terms of market share, was established in 1962 and merged with the Jordanian branch of AXA, formerly known as L'Union d'assurances de Paris, in Today, AXA owns 20% of the company. In September 2010 A.M. Best assigned the company a financial strength rating of B++ and an issuer credit rating of bbb. Recent Performance: Gross written premiums grew by 14.6% in 2010, raising the company s market share from 6.4% to 6.7%. Moreover, MEIN s bottom line recorded a growth of 17.5% during 2010 reaching JD1.2 million on the back of an 8% increase in technical profits. Price (JD) 1.95 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 8, week Low/High (JD) 1.84/2.25 MEIN.AM MEIN JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 1.19 Dividend Yield 3.1% Kawar Family 26% Bank of Jordan 4% Jordan Chemical AXA Industries Al-Masira 20% 4% Investment Co 10% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 61.4% 56.8% Expense Ratio 23.9% 28.1% Combined Ratio 85.2% 84.9% ROaA 1.7% 2.0% ROaE 3.3% 3.8% Investment Yield 3.0% 2.9% Technical Reserves / Total Equity 32.0% 34.5% Technical Reserve Ratio 101.5% 100.8% Underwriting Leverage 31.5% 34.2% Retention ratio 41.9% 42.1% The Jordanian Insurance Sector 42

43 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 National Insurance (NAAI) Background: National Insurance Company, formerly National Ahlia Insurance Company, was founded in 1965 and is engaged in a wide range of life and non-life insurance classes. NAAI operates through its headquarters in Amman, and two branches in Aqaba and Irbid. Recent Performance: Despite the 13.6% growth in gross written premiums during 2010, NAAI ended the year with a net loss of JD0.37 on substantially lower underwriting profitability with the company s combined ratio rising from around 84% in 2009 to 99% by the end of Price (JD) 1.16 Market Cap (JD m) 9.28 Shares Outstanding (m) 8.00 Avg. Daily Volume 26, week Low/High (JD) 0.83/1.38 NAAI.AM NAAI JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 1.30 Dividend Yield 0.0% Munjed Sukhtian 27% Al-Naouri Family 9% Baher Al- Adnani 6% George National Daksian Portfolio 15% Securities 18% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 51.4% 66.7% Expense Ratio 32.9% 32.2% Combined Ratio 84.3% 98.8% ROaA 1.3% -2.8% ROaE 2.2% -5.0% Investment Yield 1.8% 2.5% Technical Reserves / Total Equity 36.0% 57.7% Technical Reserve Ratio 71.4% 69.2% Underwriting Leverage 50.4% 83.3% Retention ratio 47.2% 65.1% The Jordanian Insurance Sector 43

44 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Philadelphia Insurance (PHIN) Background: Established in 1980, Philadelphia Insurance Company offers non-life insurance and reinsurance products and services. Recent Performance: Gross written premiums jumped by a significant 62% in 2010 to reach JD5.4 million raising PHIN s market share from only 0.9% in 2009 to around 1.3%. Underwriting profits also improved during 2010 with the company s combined ratio dropping from around 99% to 93% by the end of Thus, technical profits grew by more than 830% to stand at JD0.28 million, up from only JD0.03 million in Price (JD) 1.03 Market Cap (JD m) 4.12 Shares Outstanding (m) 4.00 Avg. Daily Volume week Low/High (JD) 1.03/1.30 PHIN.AM PHIN JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.93 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Hussein Zakarneh 5% Adham Al- Edreesi Muhyeddin 8% Al-Jamal 9% Abu-Alrub Family 22% Esleem Family 20% Loss Ratio 74.5% 73.3% Expense Ratio 24.4% 19.7% Combined Ratio 98.9% 93.0% ROaA -1.9% 1.5% ROaE -3.5% 3.0% Investment Yield 0.1% 1.1% Technical Reserves / Total Equity 75.0% 82.6% Technical Reserve Ratio 105.7% 91.3% Underwriting Leverage 71.0% 90.5% Retention ratio 90.6% 74.5% The Jordanian Insurance Sector 44

45 Arab Assurers Company (ARAS) Background: Established in 1995, the Arab Assurers Company provides all classes of life and non-life insurance products and services through a network of five branches across Jordan. Recent Performance: Gross written premiums witnessed a slight growth of 2% in 2010 reaching JD11.77 million. However, the company s market share decreased from 3.2% in 2009 to 2.9% in ARAS also reports a net loss of JD1.4 million in 2010 compared to a loss of JD3.5 million in the previous year. Price (JD) 0.48 Market Cap (JD m) 3.84 Shares Outstanding (m) 8.00 Avg. Daily Volume 5 52-week Low/High (JD) 0.70/0.71 ARAS.AM ARAS JR Gross Written Premiums Net Written Premiums 8.96 N/A Net Claims Paid 9.43 N/A Total Cost of Claims N/A Net Income Technical Profit N/A Investment Profit N/A P/E (x) NEG P/B (x) 3.15 Dividend Yield 0.0% Sulieman Khatatneh 10% Badr Family 14% Arab Assurers Pension Fund 6% Arabian Amlak Developme Jordan nt Co. 5% 6% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 91.1% N/A Expense Ratio 26.1% N/A Combined Ratio 117.2% N/A ROaA -22.4% -10.3% ROaE -77.8% -71.9% Investment Yield -11.1% N/A Technical Reserves / Total Equity 238.3% 674.4% Technical Reserve Ratio 74.0% N/A Underwriting Leverage 322.1% N/A Retention ratio 77.7% N/A The Jordanian Insurance Sector 45

46 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Islamic Insurance (TIIC) Background: The Islamic Insurance Company was established in 1996 and offers a wide range of non-life insurance products and services in accordance with Islamic Sharia principals. Jordan Islamic Bank holds around 39% of the company s capital. Recent Performance: TIIC maintained its position as the largest takaful provider in the Kingdom, capturing around 46% of the Takaful market and 3.65% of the total market, after the company s top line grew by 5.6% in 2010 reaching JD14.9 million. Moreover, TIIC recorded a technical profit of JD0.39 million in 2010 compared to a technical loss of 0.75 million in Price (JD) 1.45 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 1, week Low/High (JD) 1.40/1.87 TIIC.AM TIIC JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 1.09 Dividend Yield 3.4% Jordan Islamic Bank 39% Islamic Arab Insurance Co. 20% Ayman Hatahet 6% 30% Al-Amin for Investment 5% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 70.0% 66.2% Expense Ratio 37.6% 30.3% Combined Ratio 107.6% 96.5% ROaA 0.9% 1.5% ROaE 1.3% 2.1% Investment Yield -4.2% -0.4% Technical Reserves / Total Equity 38.8% 34.1% Technical Reserve Ratio 58.7% 53.6% Underwriting Leverage 66.2% 63.5% Retention ratio 71.4% 67.7% The Jordanian Insurance Sector 46

47 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Mediterranean & Gulf Insurance (MDGF) Background: Mediterranean & Gulf Insurance Company was established in 2006 by Medgulf Group, one of the leading insurance and reinsurance companies in the MENA region, and provides a wide rage non-life insurance products and services. Recent Performance: MDGF continued to report technical losses in 2010 despite the 6% growth in the company s gross written premiums which reached JD10.1 million by the end of the year, a market share of 2.5%. Price (JD) 1.30 Market Cap (JD m) Shares Outstanding (m) Avg. Daily Volume 7, week Low/High (JD) 1.26/1.46 MDGF.AM MDGF JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) NEG P/B (x) 1.46 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital % Ahli Bank 4% Al-Amal Ziyad Financial Manaseer Inv. 20% 4% MedGulf 56% Loss Ratio 91.7% 92.4% Expense Ratio 15.3% 15.4% Combined Ratio 107.0% 107.8% ROaA -2.1% -5.2% ROaE -3.6% -10.6% Investment Yield 6.1% 0.3% Technical Reserves / Total Equity 61.0% 44.2% Technical Reserve Ratio 81.5% 68.2% Underwriting Leverage 74.8% 64.9% Retention ratio 76.9% 57.1% The Jordanian Insurance Sector 47

48 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 United Insurance (UNIN) Background: United Insurance was established in 1972 and merged with Egypt Insurance Company and New India Assurance Company in UNIN provides a wide range of life and non-life insurance products in Jordan and other Arab markets. Recent Performance: UNIN was able to increase its market share in 2010 to around 3.1%, up from 2.7% in the previous year. This was reflected in the company s underwriting profitability with the combined ratio falling to 93% compared to around 97% in In April 2011 UNIN distributed a cash dividend of JD0.08 for the year Price (JD) 1.32 Market Cap (JD m) Shares Outstanding (m) 8.00 YTD Change 4,813 Avg. Daily Volume 0.93/ week Low/High (JD) UNIN.AM UNIN JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.88 Dividend Yield 6.1% Abu-Jaber Family 53% The New India 33% Assurance Misr Co. Insurance 9% 6% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Loss Ratio 68.1% 71.1% Expense Ratio 28.5% 22.0% Combined Ratio 96.6% 93.1% ROaA -0.6% 2.8% ROaE -0.9% 5.2% Investment Yield 0.8% 3.3% Technical Reserves / Total Equity 35.8% 54.2% Technical Reserve Ratio 69.6% 70.4% Underwriting Leverage 51.4% 77.1% Retention ratio 63.0% 72.3% The Jordanian Insurance Sector 48

49 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Yarmouk Insurance (YINS) Background: Established in 1980, Yarmouk Insurance Company provides life and non-life insurance and reinsurance products and services. Recent Performance: YINS returned to profitability in 2010 after recording a 35% surge in gross premiums, raising the company s market share from 1.5% in 2009 to 1.8% in Technical profit and net income ended the year at JD0.36 million and JD0.25 million compared to losses of JD0.73 million and JD0.74 million in 2009 respectively. Price (JD) 0.81 Market Cap (JD m) 6.48 Shares Outstanding (m) 8.00 Avg. Daily Volume 6, week Low/High (JD) 0.74/0.86 YINS.AM YINS JR Share Price Performance Gross Written Premiums Net Written Premiums Net Claims Paid Total Cost of Claims Net Income Technical Profit Investment Profit P/E (x) P/B (x) 0.72 Dividend Yield 0.0% Total Assets Total Investments Technical Provisions Total Shareholders Equity Paid up Capital Abu- Ragheb Family 38% 41% Arab Iron & Steel 9% Mohammed Al-Araj 6% Awni Al- Saket 6% Loss Ratio 87.1% 43.9% Expense Ratio 37.7% 44.9% Combined Ratio 124.8% 88.8% ROaA -5.4% 1.9% ROaE -8.3% 2.9% Investment Yield 1.9% -2.1% Technical Reserves / Total Equity 18.4% 22.2% Technical Reserve Ratio 114.4% 88.5% Underwriting Leverage 16.1% 25.1% Retention ratio 25.7% 30.6% The Jordanian Insurance Sector 49

50 Company Scorecards The Jordanian Insurance Sector 50

51 The Jordanian Insurance Sector ALICO JOIN MEIN AALI AAIN AGICC JIJC FINS TIIC UNIN AIUI ARIN JERY ARSI AMMI MDGF GARI JOFR DICL YINS ARAS NAAI HOLI OASI ARGR PHIN ARAI GERA Total Assets 2010 (JD Million) JOIN ALICO MEIN FINS JIJC AALI AAIN TIIC ARSI UNIN JERY GARI AIUI DICL ARIN AGICC YINS MDGF AMMI ARAI NAAI JOFR OASI PHIN HOLI ARGR GERA ARAS Total Equity2010 (JD Million) AIUI AALI ARIN JERY UNIN AGICC AAIN OASI JOIN YINS PHIN GARI MEIN FINS JIJC DICL TIIC JOFR P/E Ratio ARAI JIJC GARI ARSI YINS ARIN OASI FINS AGICC JOFR UNIN AMMI PHIN TIIC MEIN HOLI NAAI AALI JERY DICL MDGF AIUI AAIN JOIN ARGR GERA ARAS P/B Ratio % -25% -15% -5% 5% 15% 25% 35% 45% 55% AIUI AALI JERY AAIN JOIN UNIN ARIN NAAI AGICC MEIN OASI DICL PHIN YINS TIIC FINS GARI JOFR JIJC ARSI AMMI MDGF HOLI ARAI GERA ROaE % -11% -6% -1% 4% 9% 14% 19% 24% AIUI AALI JOIN JERY AAIN UNIN ARIN DICL MEIN YINS FINS OASI TIIC PHIN AGICC GARI JIJC JOFR ARSI NAAI AMMI HOLI MDGF ARAS GERA ROaA 2010

52 The Jordanian Insurance Sector 52 40% 60% 80% 100% 120% DICL JOIN AALI MEIN AAIN JERY YINS ARIN PHIN UNIN AGICC GARI JOFR FINS OASI AIUI JIJC TIIC NAAI HOLI AMMI MDGF ARSI ARAI Combined Ratio % 20% 40% 60% 80% 100% 120% 140% AAIN MEIN GARI JERY PHIN ARIN YINS AIUI ARGR DICL JOIN AALI ARSI AMMI UNIN NAAI HOLI MDGF JIJC ARAI TIIC FINS AGICC OASI JOFR Technical Reserve Ratio % 20% 40% 60% 80% 100% 120% HOLI ARAI AIUI ARSI ARIN ARGR OASI AMMI PHIN UNIN JOFR JERY TIIC AAIN JIJC NAAI AGICC MDGF GARI JOIN AALI DICL MEIN GERA FINS YINS Retention Ratio % 2% 4% 6% 8% 10% 12% 14% AALI JOIN AGICC MEIN AAIN JOFR JIJC TIIC AMMI AIUI ARIN UNIN ARAS OASI JERY FINS GARI HOLI ARSI MDGF NAAI ARGR YINS ARAI DICL PHIN GERA Market Share % 20% 40% 60% 80% 100% 120% 140% YINS DICL JOIN MEIN ARIN JERY AAIN GARI AALI FINS JOFR TIIC NAAI AGICC UNIN PHIN OASI AIUI AMMI JIJC ARSI HOLI ARAI MDGF ARGR GERA Loss Ratio GERA FINS YINS DICL MEIN JOIN JIJC GARI ARSI AAIN TIIC MD JERY UNIN ARAI NAAI PHIN ARIN AIUI AALI AMMI OASI AGI JOFR ARGR HOLI Underwriting Leverage 2010

53 Capital Investments Research Contacts: Tarek Yaghmour Head of Research Tel: Ext. 327 [email protected] Trading contacts: Wissam Al-Hourani Head of Local Markets Brokerage Department Tel: Ext. 262 [email protected] Customer Service: Sawsan Saleh Head of Customer Service Tel: Ext. 349 [email protected] Nawaf Masri Research Analyst Tel: Ext. 478 [email protected] Khaldon Al-Zoubi Assistant Manager Local Markets, Brokerage Department Tel: Ext. 351 [email protected] Disclaimer The information and opinions contained in this document have been compiled in good faith from sources believed to be reliable. Capital Investments makes no warranty as to the accuracy and completeness of the information contained herein. All opinions and estimates included in this report constitute and reflect our independent judgment as of the date published on the report and are subject to change without notice. Capital Investments accepts no liability whatsoever for any loss of any kind arising out of the use of all or any part of this report. Capital Investments and its related companies may have performed or seek to perform any financial or advisory services for the company mentioned in this report. Capital Investments, its funds, or its employees may from time to time take positions or effect transactions in the securities issued by the company mentioned in this report.this document may not be reproduced in any form without the expressed written permission of Capital Investments. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice.. The Jordanian Insurance Sector 53