Middle East and Gulf Cooperative Insurance: Financial Analysis

Middle East and Gulf Cooperative Insurance (Medgulf) was established as one of the leading companies in the insurance sector in Saudi Arabia. It is listed on the main Saudi financial market (Tadawul) under the symbol 8030 and has been operating since its inception within a cooperative framework compliant with Islamic law. The company has a strong capital base represented by 105 million ordinary shares, with a market capitalization exceeding 1.7 billion Saudi Riyals according to the latest traded prices. Medgulf offers a diverse range of insurance products, including health insurance, property insurance, accident insurance, marine and air cargo insurance, in addition to reinsurance services. The company is characterized by strict adherence to Sharia and regulatory standards and is supervised by the General Entertainment and Insurance Authority, in addition to Islamic Monetary Fund standards. This has earned it the trust of a wide sector of individuals and institutions in the Saudi market.

The activities of Middle East and Gulf Cooperative Insurance vary to include several main lines of production. Foremost among them is health insurance, where the company offers group and individual insurance programs in collaboration with governmental and private institutions. It also provides property insurance services, which include protecting buildings, factories, and warehouses from various risks such as fire, theft, and natural disasters. The company also offers personal accident insurance and civil liability insurance, as well as marine and air insurance covering commercial shipments. On the other hand, reinsurance services play a pivotal role in the company's business model, as the company redistributes part of the underwritten risks to local and international reinsurance companies, enhancing its ability to cover large claims and reducing significant financial risks. All these services are provided according to strict regulatory standards, and the company is highly flexible in developing new products that meet local market needs.

The financial indicators for Middle East and Gulf Cooperative Insurance have shown notable fluctuations during 2024 and 2025. The stock price in the market was approximately 16.8 Saudi Riyals, with a market capitalization of around 1.77 billion Riyals. The price-to-earnings (P/E) ratio was approximately 17.3, with a net annual profit reaching 101.99 million Riyals in 2024, which is a decrease of 49.4% compared to 2023. The company did not distribute dividends during the past two years, resulting in a nearly nonexistent dividend yield. On the operational performance side, total written premiums increased by 19% to reach 3,731.15 million Riyals, and insurance revenues rose to 3,551.79 million Riyals (a growth of 6.6%). However, quarterly profits showed a significant decline in the fourth quarter of 2024, with profits amounting to only 3.0 million Riyals. These figures reflect challenges in managing costs and insurance claims amid revenue growth and an expanding customer base.

The quarterly and annual results of Medgulf for 2024 show a changing pattern in financial performance. In the first three quarters of 2024, the results were relatively stable, with a net profit of approximately 99 million Riyals over nine months. However, the fourth quarter saw a sharp decline in profits to only 3.0 million Riyals, negatively impacting annual results. This decline is attributed to several factors, primarily increased operational and underwriting expenses, as well as rising insurance claims in certain sectors. On the revenue side, the company experienced growth in total written premiums and insurance revenues, but rising costs had a clear impact on profit margins. It is noteworthy that quarterly changes in insurance companies' results are not uncommon, as they are significantly affected by seasonal claims, regulatory changes, and general economic conditions.

The Saudi insurance sector is one of the most developed and growing sectors in the Middle East, subject to strict supervision and regulation by the Saudi Arabian Monetary Authority and the General Entertainment and Insurance Authority. The sector is witnessing strong competition among more than 30 insurance companies, ranging from cooperative, health, property, accident, and reinsurance. Some of the key challenges facing companies in this sector include rising claims costs, pressure on profit margins, and ongoing legislative changes aimed at enhancing financial solvency and protecting customer rights. Additionally, rising interest rates and operational inflation put pressure on the financial performance of most companies. Conversely, the sector benefits from increased demand for mandatory health insurance, auto insurance, and initiatives from Saudi Vision 2030 aimed at enhancing financial inclusion and developing insurance products.

Medgulf faces fierce competition from several major companies in the Saudi market, including Cooperative Insurance Company, Malath Insurance, and Bupa Arabia for Health Insurance. These companies are characterized by larger premium volumes or a focus on specific sectors such as medical or property insurance. While Medgulf adopts a strategy of product and customer diversification, competing companies seek to develop digital distribution channels, enhance partnerships with government sectors, and innovate specialized insurance products. The market is also witnessing trends towards mergers or strategic collaborations to improve operational efficiency and expand market share. Although Medgulf has maintained a broad customer base and positive growth in written premiums, the pressure on net profits and the absence of dividends present additional challenges in attracting investors compared to some competitors that have managed to maintain higher profit margins or annual dividend growth.

Medgulf Insurance showed strong performance in terms of revenue growth and written premiums during 2024, with premiums rising by 19% to 3,731.15 million Riyals, and insurance revenues increasing by 6.6%. This reflects the company's expansion in its customer base and product diversity, in addition to benefiting from the growing demand for health and auto insurance. However, this revenue growth did not fully translate into higher net profits due to rising claims costs and operational expenses. It is noted that large insurance companies often face challenges in balancing market share expansion while maintaining appropriate profitability levels, especially amid fierce competition and price pressures. In this context, Medgulf is a clear example of this challenge, having succeeded in raising revenues but facing pressures on net profit.

Medgulf Insurance has not distributed cash dividends over the past two years, primarily due to declining net profits and precautionary measures amid operational and financial challenges facing the sector. The decision to distribute dividends in insurance companies typically depends on the size of realized profits, solvency requirements, and the board's vision to maintain capital. In Medgulf's case, the board preferred to retain profits to support financial stability and enhance the company's reserves. This is reflected in a nearly nonexistent dividend yield per share during the recent period. It is important to note that dividend distribution policies in the Saudi insurance sector may vary from year to year based on economic and regulatory variables and are often announced during annual general meetings with the approval of the relevant regulatory authorities.

Medgulf Insurance is subject to close supervision and oversight by the General Entertainment and Insurance Authority, in addition to the Saudi Arabian Monetary Authority. This requires the company to comply with solvency standards, disclosure and transparency requirements, and risk management controls. The company also adheres to corporate governance rules that ensure the protection of the rights of all stakeholders, including owners, customers, and regulatory bodies. No major violations or punitive actions against the company have been recorded recently by regulatory authorities, reflecting its commitment to regulatory controls. The company is also keen to update its internal policies and align its operations with new government initiatives, such as the 'Takaful' vision launched by the authority, aimed at enhancing competitiveness and sustainability in the cooperative insurance sector.

The year 2024 witnessed several notable developments for Medgulf, including the invitation of the General Assembly of owners to discuss the results of the fiscal year ending in March 2024, without any official decisions regarding cash distributions. The company also released its quarterly financial reports, which showed a decline in profits, especially in the fourth quarter. The company has not announced any significant merger or acquisition deals recently; however, the sector environment is witnessing trends towards capital enhancement and operational efficiency. The General Entertainment and Insurance Authority launched new regulatory initiatives aimed at developing the cooperative insurance market, which may create future opportunities or challenges for operating companies, including Medgulf. It is noteworthy that the company has not recorded any regulatory violations or punitive actions from official authorities during this period, continuing to develop its products and enhance its operational capabilities.

In light of the challenges facing the Saudi insurance sector, Medgulf focuses on enhancing its operational efficiency, improving risk management, and developing digital products and services. The company seeks to balance revenue growth while maintaining acceptable profitability levels by restructuring operations and reducing operational costs. The company is also expected to place increasing importance on digital transformation technologies, improving customer experience, and expanding collaboration with international reinsurance companies. Medgulf closely monitors regulatory changes and prepares to implement any new requirements to raise capital or enhance solvency. If profit pressures continue, the company may consider strategic options such as alliances or mergers to increase its competitiveness in the market.

Medgulf holds its annual general assembly meeting with the presence of owners to discuss business results, the board's report, and the company's future plans. In the last meeting held in mid-2024, owners discussed the company's performance in 2023 and 2024, without issuing official decisions regarding dividend distributions. The general assembly provides an opportunity for owners to learn about the company's developments, vote on listed items, and propose amendments to the bylaws or operational policies. The company emphasizes the importance of disclosure and transparency in communication with owners and works to publish its financial reports and official disclosures periodically on the Tadawul website and its official website.

To obtain the latest news and developments regarding Middle East and Gulf Cooperative Insurance, it is advisable to rely on accredited official sources, such as the Tadawul website, which publishes all financial and administrative announcements, in addition to the Argaam financial website that provides periodic analyses and monitoring of the company's performance. The General Entertainment and Insurance Authority also provides periodic reports on the sector, and the company's annual and quarterly reports can be accessed through its official website. Investors and interested parties are advised to regularly follow updates on prices, financial reports, and any important disclosures, utilizing alert services available through specialized financial applications.