(MENAFN- Muscat Daily) Muscat- Oman Qatar Insurance Company (OQIC) is offering 25mn shares through its initial public offering (IPO) which will be closed on Thursday. In an exclusive interview with Muscat Daily, Navin Kumar, chief executive officer of OQIC, talked about the investor response to the IPO and also discussed the company's growth prospects and future expansion plans.
How satisfied are you with investor response to OQIC IPO?
The IPO has received an overwhelming response. We want to thank Oman's investor base for the trust and faith they have showed in us. Currently, we have received a lot of interest from institutional and high net-worth individuals (HNIs) from Muscat and Salalah.
Moreover, we have received interest from foreign investors as well. We also received excellent response from research houses who have valued OQIC well above the offer price. Today OQIC is at a transformation stage and is fully ready for its next leap of growth. We are certain that investors will benefit from riding this tide along with us.
After completion of the IPO, how the company would spend proceeds from the issue?
The IPO proceed will go directly to selling shareholders on pro rata basis except 2bz per share offer expenses that will come to the company. The company has already raised its paid up capital to RO10mn pre IPO through right issue of RO4mn paid up capital and RO1mn through issuing stock dividend at par. Only 25 per cent of paid up capital was on offer through the IPO.
This additional capital will be utilised in increasing retention of risk, expansion of company's branches, and better servicing to our customers, increased investment income will be also on card.
After listing of company shares, would there be any significant changes in the constitution of the board?
Post listing, the company's board strength will increase to seven from currently six members. Being converted to SAOG company we will require to have one-third of the board members as independent directors which will require us to bring couple of independent directors on board.
What are your expansion plans for next five years?
OQIC is on its way for a massive leap in term of its size and reach. QIC Group has extended its full support to OQIC in terms of global expertise, best-in-the-region IT infrastructure, exceptional risk and underwriting frameworks and finest professionals from all around the globe to ensure OQIC's growth.
As an immediate expansion strategy, we will expand our retail direct business significantly in coming years. In next couple of years we will have our full scale branches at every large city ensuring insurance-accessibility to every citizen of the sultanate. Digital expansion is the need of the hour and OQIC is fully ready today to bring insurance services to the door steps. Motor claims online system is about to be rolled out very soon. SME related pre underwritten products will be next on this platform.
Given the current market conditions due to weak oil prices, how confident are you about the future growth prospects?
At OQIC, we see opportunities in challenges. Hydrocarbons will no longer be main driver for the world economy in coming times and the demand for oil will be significantly reduced in coming years. Renewable energy will replace it in larger way. Hence, the sultanate has already initiated initiatives to diversify its dependencies on the hydrocarbon sector.
Infrastructure, manufacturing, logistics, tourism, medical, mining and marine will lead the economy in the coming years. All of these industries rely heavily on the insurance sector to safeguard their assets. Moreover, in anticipation of these growth areas, the Council of Ministers has given their nod to mandatory medical insurance to all expatriates. The insurance sector in Oman is about to witness a steep growth in the coming years.
In your view, what will be the key growth drivers for Oman's insurance sector?
Favourable demographics
Demographics play a vital role in insurance demand generation. Oman's population constitutes two key segments: A large expatriate base and a significant number of young and the employed people. Both of these are expected to considerably impact the demand for life and non-life insurance segments. New regulations in Oman require mandatory medical insurance for expatriates.
Infrastructure development
Oman's economy continues to grow, supported by the sultanate's cash reserves and strengthening fundamentals such as economic diversification and infrastructure development in the long-term. The insurance industry is highly correlated with the economic outlook, creating demand for insurance-related products.
Regulatory developments
Over the last couple of years, Omani insurance market has witnessed multiple regulatory changes, with several new regulations in the areas of minimum capital requirement, reserve calculations, reporting requirements and many others. These regulatory reforms are likely to drive growth in the insurance industry.
Development of SMEs sector
The rapidly growing small and medium enterprises (SMEs) sector in Oman presents a key opportunity for the insurers. Generally these firms are run by the younger and more entrepreneurial-minded generation that is more open towards insurance as a means to protect its newly created assets compared to their established counterparts.
Growth in life and medical lines
In coming years health industry will be one of the fastest growing sectors in the country, which will push demand for compulsory medical insurance.
What are your views on competition and consolidation in Oman's insurance market?
Currently Oman's insurance market is crowded according to the size of the market. Some consolidation in future can be seen in the market. Consolidation will be healthy for the market. However, OQIC continues to stand out. Currently it has market dominance in property and liability line of business and will continue to carve its dominance in other profitable line of business in which it already has substantial market share.
Oman's government has made health insurance compulsory from next year. Will it boost growth significantly for insurers?
The compulsory health insurance will bring transformational change in overall health industry and it will directly benefit insurance industry. Currently it is hardly ten per cent work force which is insured. Moving to mandatory insurance regime will boost growth in insurance sector significantly.
How has been the performance of OQIC as of July 2017?
OQIC has demonstrated a phenomenal performance in the first half of 2017. Our audited July 2017 results speak for themselves. We have overachieved our topline target. Almost 61 per cent of gross written premiums for the full year of 2017 has already been achieved by first half of the year itself. All of this growth was achieved without making any compromise on the bottom line.
Our loss ratio (ratio between premiums received to claims settled) has been less than 65 per cent, which is far better than the expected 70 per cent target for 2017. Moreover, if we compare July 2017 performance as against July 2016, one will notice that net underwriting profits increased by a phenomenal 158 per cent (from RO615,966 in July 2016 to RO1,591,677) and our profit for the period surged 422 per cent (from RO276,411 to RO1,443,739).
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