Al Rajhi Takaful: Financial Performance Analysis and Growth Opportunities in the Saudi Insurance Sector

Al Rajhi Takaful was established as a Saudi joint-stock company operating in the field of cooperative insurance, aiming to provide Sharia-compliant insurance solutions. The company operates under the supervision of the Saudi Arabian Monetary Authority (SAMA) and the Capital Market Authority (CMA), and is listed on the Saudi stock market (Tadawul) under the symbol 8230. Al Rajhi Takaful benefits from the strong distribution network of Al Rajhi Bank in financial product development, giving it a competitive advantage in reaching a wide customer base. Its operations focus on health insurance, vehicle insurance, accident insurance, and marine insurance, along with specialized products for small and medium-sized enterprises. The company's commitment to Sharia and regulatory standards has contributed to building a strong reputation in the market and has led to stable financial performance compared to some competitors in the sector.

Al Rajhi Takaful's capital is several million riyals, with an estimated market value of approximately 2.5 billion Saudi riyals by the end of 2024. The stock price at the beginning of 2025 was around 15.80 Saudi riyals, with slight fluctuations during 2024. The company's price-to-earnings (P/E) ratio is approximately 18.5 times, which is an average level compared to major companies in the sector. The cash dividend yield was about 2.5% based on the 2024 distributions. The financial statements for the third quarter of 2024 show a revenue growth of 13% compared to the same period last year, with net profit growth of 10%. This performance demonstrates the company's ability to control costs and improve operating profit margins, despite accounting challenges arising from the implementation of the IFRS 17 standard.

The Saudi insurance sector is witnessing annual growth driven by increased insurance awareness, local economic expansion, and rising demand for health insurance and vehicle coverage. Reports from the Saudi Arabian Monetary Authority indicate that total written insurance premiums grew by over 8% in 2024. Cooperative insurance companies, including Al Rajhi Takaful, benefit from government support to diversify the economy under Vision 2030. Companies vary between traditional, cooperative, and specialized, increasing competition and stimulating innovation. In recent years, major national projects such as NEOM have played a role in opening new markets for real estate and industrial insurance. The application of modern regulations such as the IFRS 17 standard has enhanced market transparency, while digital initiatives have improved customer experience and expedited underwriting and claims processes.

Al Rajhi Takaful's results for the third quarter of 2024 showed a significant increase in total written premiums (680 million riyals compared to 600 million in the same period of 2023), with net profit growth of 10% to 110 million riyals. In the first half of 2024, written premiums rose by about 11% year-on-year, reflecting the company's expansion in health insurance and vehicle insurance. Effective cost management contributed to improved profit margins and cash flow. Additionally, the implementation of the IFRS 17 standard helped highlight the quality of the insurance portfolio and the robustness of reserves. These results confirm the company's ability to achieve sustainable growth, despite the competitive environment and ongoing regulatory changes.

Al Rajhi Takaful offers a wide range of Sharia-compliant insurance products, including health insurance for individuals and businesses, comprehensive vehicle insurance, personal accident insurance, marine insurance, and asset protection programs. The company also provides tailored solutions for small and medium enterprises and meets the needs of large corporations through group insurance packages. In recent years, the company has focused on developing digital products such as electronic insurance documents and remote claims management. This diversity in products enhances the company's ability to attract different customer segments and face increasing market competition.

Al Rajhi Takaful competes with several major insurance companies in the Kingdom, including Tawuniya Insurance (the oldest and largest company by assets), Malath Insurance and Reinsurance, Al-Medgulf, Asiage, Wafa Insurance, and Arqa Insurance Cooperative. The market also includes specialized companies such as Bupa Arabia and AXA for Life. The success of companies depends on product quality, distribution network strength, and level of digital service. Al Rajhi Takaful benefits from its relationship with Al Rajhi Bank, while some other companies are distinguished by larger asset sizes or wider distribution. Intense competition drives companies to innovate in products and improve operational efficiency.

In recent years, new regulatory standards have been implemented, such as requiring all insurance companies to apply the IFRS 17 accounting standard since 2023. This standard has changed the way companies calculate profits and liabilities, leading to improved transparency in financial data and strengthening reserves. The Saudi Arabian Monetary Authority has intensified inspection campaigns to ensure companies comply with governance and transparency policies. Al Rajhi Takaful has not recorded significant regulatory violations recently, indicating its commitment to regulatory requirements. These changes have increased sector efficiency and boosted the confidence of stakeholders and investors in the financial data of listed companies.

Al Rajhi Takaful places great importance on digital transformation, having launched online platforms for purchasing insurance policies and managing claims remotely. The company's services have also been integrated with Al Rajhi Bank applications, making it easier for customers to access banking insurance products and digital services. Digital transformation has helped reduce operational costs, speed up application cycles, and improve customer service. In 2024, the company focused on expanding electronic insurance packages, especially vehicle insurance for youth and health insurance for startups, contributing to increased financial inclusion and supporting Vision 2030 goals in the digital economy.

Al Rajhi Takaful has growth opportunities due to rising demand for health insurance, expansion of national projects, and increased awareness of the importance of insurance among individuals. Digital transformation, collaboration with the banking sector, and developing new products such as micro-takaful represent strategic growth axes. Conversely, the company faces challenges such as intense competition, fluctuations in interest rates, risks related to delayed payments from major clients, and ongoing regulatory changes. It is important for the company to continue investing in technology and developing human resources to ensure sustained growth and enhance market share.

Al Rajhi Takaful follows a periodic dividend distribution policy based on business results and the board's estimates. In 2024, the cash dividend yield was approximately 2.5%, with a distribution of 0.35 riyals per share. The company maintains a balance between profit distribution and strengthening reserves to support future growth. The continuation of dividends depends on the company's profitability and investment policies, considering sectoral variables and new regulations. The regular distribution policy enhances the stock's attractiveness to investors seeking stable income, compared to some competing companies that may prefer to reinvest profits entirely.

Major national projects such as NEOM, housing projects, and renewable energy projects contribute to opening new markets for insurance products. Al Rajhi Takaful benefits from these transformations by developing real estate insurance solutions and business insurance for large projects. Additionally, Vision 2030 has increased the importance of the insurance sector as part of economic diversification and heightened focus on financial inclusion and mandatory health insurance. This environment allows Al Rajhi Takaful to expand its customer base, develop specialized products, and collaborate with governmental and private entities to enhance future growth.

Al Rajhi Takaful adheres to strict governance standards imposed by the Capital Market Authority and SAMA, including periodic disclosure, risk management, and anti-money laundering policies. Transparency in financial reporting and disclosure of business results enhances investor confidence. The company's commitment to governance policies supports its financial stability and reduces regulatory risks. Regulatory authorities intensified inspection campaigns in 2024, and Al Rajhi Takaful is among the companies that have not recorded significant violations, confirming the strength of its governance system and awareness of the importance of regulatory compliance.

Al Rajhi Takaful's strategy focuses on measured market expansion, digital product development, and strengthening partnerships with the banking and healthcare sectors. The strategy includes using artificial intelligence to analyze claims, developing smart applications for purchasing policies, and enhancing operational efficiency. The company is also keen on diversifying its investments and increasing financial reserves to face market fluctuations. Collaboration with Al Rajhi Bank allows the company to access a wide customer base and enhance the distribution of banking insurance products. This strategy aims to ensure sustainable growth and achieve a balance between profitability and risks.