Walaa’s Q2 higher profit backed by better business mix, lower motor accidents: CEO

Walaa Cooperative Insurance Co.’s higher profit in Q2 2020 was driven by a better business mix in motor line and a reduction in motor accidents during the lockdown period, Chief Executive Officer Johnson Varughese told Argaam.

However, this was partly offset by additional premium deficiency reserve (PDR) to cover the potential impact of a two-month extension of retail motor insurance policies, he added.

In addition, the actual impact of the compulsory insurance initiative will likely depend on the implementation mechanism. However, gross written premiums (GWPs) are forecast to rise as of Q3 2020 amid a growth in the motor market share. Also, Walaa’s net profit is expected to be positively impacted by accumulated interest along 2021.

Here's the interview in detail:

Q: Walaa swung to SAR 28.35 million in profit in Q2 2020, how do you perceive these results?

A: Walaa’s higher profit in Q2 2020 was mainly driven by a better business mix in motor line and a reduction in motor accidents during the lockdown period. This was partly offset by additional premium deficiency reserve to cover the potential impact of a two-month extension of retail motor insurance policies.

Q: You expected the compulsory insurance initiative to positively impact the financial performance. Would you tell us how this decision impacted the company’s sales revenue?

A: The actual impact of the compulsory insurance initiative will likely depend on the implementation mechanism. However, gross written premiums (GWPs) are forecast to rise as of Q3 2020 amid a growth in the motor market share. Also, Walaa’s net profit is expected to hike, backed by accumulated interest along 2021.

Q: Does the company have any merger plans?

A: Walaa is always open to value-adding growth opportunities, given that we find the right company at the right price.