Bupa Arabia’s Q1 driven by 16% higher GWP: Al Rajhi Capital

Bupa Arabia reported a net profit of SAR 94.1 million in Q1 2019, mainly driven by a 16 percent year-on-year (YoY) increase in gross written premiums (GWP) to SAR 2.9 billion mainly due to higher prices which started in H2 2018, Al Rajhi Capital said in an earnings review.

“The recent (as of July 2018) increase in table of benefits for new/renewed policies mandated by the CCHI forced insurance companies to raise their policy prices which is the main reason for the jump in GWP,” the brokerage said.

Q1, which is seasonally a strong quarter particularly for health insurance, was also supported by higher investment and other income and lower provision for doubtful receivables.

“Going forward, for short term we expect increase in policy prices to continue driving GWP growth till the end of H1 2019. For longer run Bupa is set to benefit from structural factors such as mandatory insurance for Saudis working in private sector and higher participation of private sector in the economy,” the report said.

The 15 percent cash dividend of SAR1.5 per share for the fiscal year 2018, amounting to SAR 180 million, represents a 31 percent pay-out ratio which is below estimates, as the firm seems to be more focused towards enlarging its investment portfolio, the review said.

Bupa is seen to continue gaining the market share given its leadership position the health insurance market.

Al Rajhi Capital maintained a “Neutral” rating on the stock with a target price of SAR 93 per share.