Notes

2:17pm
For Reserves as at December 31th, 2021, we will discuss below:

ULAE:
The table shows the calculation of ULAE reserve on a gross of reinsurance basis.
ULAE on net of reinsurance basis is set equal to the ULAE reserve on a gross of reinsurance basis. The assumption here is that half the expenses are incurred at time of opening of the claim and half at time of settlement of the claim. Hence, the ULAE ratio is adding 50% to OSLR and 100% to IBNR. and then multiplied to 7.5%, a fixed estimate for all line.
Outstanding for a large claim has been excluded for ULAE calculation

URR:
The table show the required element for the calculation of URR. As,URR is kept if the expected inflow (UPR) is not enough to cover the expected outflow. so, If Excess UPR > 0, then URR = 0
If Excess UPR < 0, then URR = (Excess UPR) * - 1
Excess UPR is being calculated by this formula = UPR – Expected Claims – Expected Expenses.
URR is determined on a net of reinsurance basis. As, company do not defer RI commission so, Gross URR is set equal to the Net URR.

Fire Gross ultimate loss ratio:
In terms of GWP, Fire is being the largest LOB and due to the nature of this LOB it is prone to large losses. But due to sizeable premium, the loss ratio have done fairly well except in 2021 with cumulative report loss ratio at 54% and cumulative ultimate loss ratio of 61%. The Earned premium is also growing year to year. In AY 2021, the gross ultimate ratio increased to 126% due to a AED 42M large loss in Fire.

Marine Cargo ultimate loss Ratios:
The cumulative gross reported loss ratio is 25% while the cumulative ultimate loss ratio for marine cargo is 28%. AY 2017 have comparetively large loss ratio due to a large claim in 2017.
The earned premium for marine cargo have increased from 2017 to AY 2019 but declined since.

Motor Gross Ultimate Loss Ratios:
The volume in this LOB is very small leading to a lack of credibility that why we cannot see volatility in the results. Having said that, the gross ultimate loss ratios have been at or below 25% over the review period
The Negative OS is due to OS salvage subrogation in recent quarters.

Underwriting
This is the graph of portfolio mix for the ending quarters of 2020 and 2021. The business composition is consistent with fire being largest line contributing 81% of gross portfolio in 2020 and 69% in 2021. Similar situation is on net side.
The share of Fire in portfolio has decline due to decrease in written business of Fire in 2021.

These graph show the line of business wise premium and their growth in 2021 compared to 2020.
The total gross written premium has decreased 88M to 70.1M in 2021 which is primarily driven by Fire. Except Fire and motor, all the line have shown an increase. For Net written premium the Fire, Engineering and Motor has decreased and GA and Marine has increased. The main reason for low written premium in current year the decrease is the substantially high Written business of Fire in 2020.

Methodology and assumption
Here are some formula that we have used into our methodology,
Ultimate Claims at particular time being equated to Claims Paid, Claims OS and IBNR at that time.

Loss Ratios:
Except Fire, all the LOBs are volatile due to the premium volume and the nature of business.
Fire have been consistently decline since 2018 due to premium growth but in 2021 the loss ratio has significantly increased to 126% due to a substantial large loss of 42 M.
So, the overall gross and net loss ratios are driven by Fire line.

Commission Ratio:
The overall gross commission ratios have increased from 16% in AY 2017 to 20% in AY 2020 and since decreased to 14% mainly due to decrease in fire gross commission ratio.

The gross commission ratio for Fire has a decreasing trend except in 2020. In AY 2020 there were few large policies which leads to high gross commission ratios.

For the Net commission ratio, The Fire trend is same, engineering ratio is -26% in AY 2021 which is due to RI commission exceeding gross commission primarily due to a large engineering policy which is only 13% retained in 2021

The overall net commission ratios is volatile over the review period and at its lowest 11% in AY 2021 mainly brought down by Engineering and Fire.

Expenses Ratios:
The gross expense ratio has shown a consistent decline from 34% in 2017 to 15% in 2021 which shows that the Company has achieved expense efficiency as volumes have increased

Net Expense Ratio have also declining trend from 2017 to 2020 and increased 1% in 2021

Cost of Reinsurance:
The overall cost of reinsurance has continued to increase over the last three years.
it is nearly doubled in 2021 from AED 5.3M in 2020 to AED 10.1M. This increase is brought on primarily by increase in RI earned premium for Fire and Engineering which is driven by some large policies written in previous years.
The cost of reinsurance for Engineering was at its lowest in AY 2019 due to the high volume of reinsurance commission written by this line.
The overall cost of reinsurance has increased from 10% in AY 2020 to 15% in AY 2021. All lines of business experienced an increase.

Gross Underwriting performance:
If the gross combined ratio is below 100%, a line is considered profitable.
The gross combined ratios had a decreasing trend from 143% in AY 2017 to 48% in AY 2020 reflected in the increase in underwriting surplus. For AY 2021 Fire has incurred a substantial deficit due to a large claim of AED 42M. As, company is heavily relied on Fire performance so, this leads to an overall gross underwriting deficit.
The gross underwriting surplus have decreased.of all the LOBs except fire in AY 2021.

Net Underwriting performance:
Similar to gross, overall net combined ratio has been decreasing since 2017 to 2020 and increasing in 2021.The decline in Net Combined ratios reflect the growth in total net underwriting surplus.

Underwriting performance
The loss ratios have a higher variance on the net level as compared to the gross level for all lines indicating an un-favourable reinsurance arrangement. The combined ratios also have a higher variance on the net level. Motor has the same gross and net ratios since it is not reinsured. The Company can look to assess and optimize its reinsurance arrangement.

Business Plan Comparison
The table compared the Company’s business plan against actual performance obtained from eForms. For AY 2021, the ratios have been calculated using draft financials.
Despite some negative deviations, the Company has been performing better than its targets. In FY 2021, net loss ratio is above the target due to significant a large Claim in Fire of AED 42M