Walaa Insurance: Comprehensive Analysis of Financial Performance

Walaa Insurance Cooperative Company was established to be one of the leading players in the Saudi insurance sector, operating under a license from the Saudi Arabian Monetary Authority (SAMA). The company is distinguished by providing cooperative insurance services, where policyholders share in the company's profits, reflecting its commitment to principles of cooperation and social responsibility. Walaa's insurance services cover various sectors, including private and commercial vehicle insurance, property insurance, engineering insurance, energy insurance, as well as protection and savings coverage, in addition to health insurance products. The company's origin in the Saudi market and its integration into the Tadawul financial market has granted it a strong presence within the general index (TASI), making it a focal point for investors and those interested in the insurance sector. Walaa Insurance continuously seeks to develop digital solutions and improve its services, keeping pace with technological advancements and diversifying its insurance portfolios in line with evolving market demands.

The Saudi insurance sector is witnessing steady growth supported by economic and regulatory factors, especially with the Kingdom's aim to increase insurance penetration as part of Vision 2030. Insurance companies in Saudi Arabia are under strict supervision from the Saudi Arabian Monetary Authority (SAMA) and the Capital Market Authority (CMA), and are required to implement modern international accounting standards such as IFRS 17, which has enhanced the sector's transparency and the safety of companies' assets. Ongoing regulatory developments, such as restructuring capital controls and increasing solvency requirements, directly affect companies' policies, prompting them to bolster reserves and support financial positions. The government also encourages mandatory health insurance and initiatives for property and energy insurance, opening new avenues for growth. In this context, Walaa Insurance is keen to adapt to these regulatory changes and update its policies to ensure the sustainability of its operations and enhance its competitive position.

Walaa Insurance offers a diverse range of products including vehicle insurance for individuals and businesses, property insurance (homes, factories, offices), engineering insurance (for construction and engineering projects), energy insurance (oil, gas, power stations), as well as protection and savings insurance and health insurance. These products meet the needs of a wide range of clients from individuals to businesses, allowing the company to diversify its income sources and reduce risks associated with reliance on a single product. Walaa aims to develop advanced digital products and streamlined processes for issuing policies and tracking claims, enhancing customer experience and increasing operational efficiency. This diversity positions the company competitively within the Saudi insurance sector and helps it navigate fluctuations in demand or competition in specific categories.

The price of Walaa Insurance stock in the latest trading session was approximately 13.84 SAR, with a market capitalization nearing 1,765 million SAR. The price-to-earnings (P/E) ratio for the stock is around 14 times, which is lower than the sector average typically ranging between 15 and 20, indicating a conservative market valuation. The company has not announced recent cash dividends, so the dividend yield is currently close to zero. In terms of financial performance for the third quarter of 2024, insurance revenues increased by 21% to 897.4 million SAR, while net profit decreased by 49.5% to 20.1 million SAR due to rising claims and operating expenses. It is noteworthy that the company's investment income saw significant growth (+49.3%), which helped mitigate the impact of operational losses. These indicators reflect strong revenues with some challenges in achieving stable operating profitability.

Walaa Insurance's results for the third quarter of 2024 showed strong revenue growth, with insurance revenues reaching 897.4 million SAR compared to 741.7 million SAR in the same quarter last year, an increase of 21%. However, net profit declined to 20.1 million SAR after zakat and tax, compared to 39.8 million SAR in the corresponding quarter of 2023. The total performance of the company during the first nine months of 2024 showed a net profit of 84.4 million SAR, down 17.8% from the same period last year, despite revenue growth of 16.8% to 2,460.7 million SAR. This decline in profitability is attributed to increased claims and underwriting and financing expenses, as well as the implementation of new accounting standards that affected distributable profits. On the other hand, the company benefited from increased investment income with rising interest rates, which helped offset some of the pressures on profit margins.

The Saudi insurance sector is one of the vital sectors experiencing continuous growth driven by the expansion of the local economy and increased demand for mandatory (health, vehicle) and commercial insurance. The Saudi Arabian Monetary Authority (SAMA) is keen to support the sector's competitiveness through strict regulations and solvency indicators that ensure the sustainability of companies and the safety of their assets. Insurance companies in the Kingdom face strong competition between established firms and startups, all racing to develop digital products, expand insurance portfolios, and improve operational efficiency. The implementation of international accounting standards (IFRS 17) has contributed to increased transparency in financial reporting, but it has also led to some fluctuations in companies' profits. Under Vision 2030, the sector has become more attractive with the launch of massive government projects requiring diverse insurance, providing growth opportunities for companies like Walaa Insurance.

Walaa Insurance competes with some of the largest listed insurance companies in the Saudi market, such as Cooperative Insurance (Takaful Al Rajhi), Malath Insurance, Arab Insurance, United Insurance, MedGulf, and Wafa Insurance, among others. These companies hold significant market shares, particularly in the health and vehicle insurance sectors. Intense competition drives all companies to develop new products and digital services, in addition to improving customer service quality. Although Walaa boasts a strong investment portfolio and product diversity, it faces challenges in terms of market share and profitability compared to major players in the sector. Additionally, some competitors have a stronger dividend distribution record, attracting a segment of investors seeking stable returns. Excellence in claims management and digital expansion remains a crucial factor in enhancing Walaa's market position.

Walaa Insurance is committed to implementing new international accounting standards, particularly IFRS 17, which has necessitated a restructuring of provisions and changes in the presentation of profits and losses. These changes have contributed to increased clarity in the company's financial position, but they have also led to fluctuations in profits during transitional periods. Furthermore, the new solvency requirements from the Monetary Authority and the Capital Market Authority require companies to maintain higher reserves, prompting some, including Walaa, to refrain from regular dividend distributions to support their financial position. Additionally, regulatory controls such as capital increases or disclosure requirements affect the company's investment and operational policies. Walaa's ability to adapt to these regulatory changes is one of the key factors in sustaining its growth and profitability.

Economic factors such as inflation and interest rates directly affect the results of insurance companies, including Walaa. Rising inflation leads to increased costs of insurance claims, especially in property and vehicle insurance, which may pressure profit margins if premiums are not raised proportionately. On the other hand, rising interest rates in the Saudi market during 2023 and 2024 have helped increase Walaa's financial investment returns (bonds, deposits), positively impacting investment income and helping to offset some operational profit declines. However, global economic fluctuations (such as financial market crises or changes in oil prices) remain a potential source of risk, as they may negatively affect the company's investment portfolio and the level of demand for insurance products.

Walaa Insurance relies on a set of strategies to enhance its growth and sustain its operations in a competitive market. Among the most important of these strategies is the development of digital channels for issuing policies and tracking claims, which reduces operational costs and enhances customer satisfaction. The company also focuses on expanding supplementary health insurance products and specialized insurance in the energy and engineering sectors. In terms of investment, Walaa benefits from rising bond and debt instrument yields and seeks to diversify its investment portfolio to enhance non-operational income. Investment in digital innovation and improving risk underwriting models are foundational pillars in facing market challenges and growing market share in the medium and long term.

The most significant opportunities available to Walaa Insurance lie in the growth of the Saudi market driven by increased insurance awareness, the expansion of mandatory health insurance, and rising demand for commercial and industrial insurance. Additionally, digital transformation and the innovation of new products provide opportunities to enhance operational efficiency and attract new customer segments. Conversely, the company faces challenges including fluctuations in claims (especially amid climate events and natural disasters), tightening regulatory and solvency requirements, and intense competition from major companies. Managing these risks and opportunities requires Walaa to have a clear strategy for liquidity management, product development, and diversifying income sources in line with the rapid dynamics of the sector.

Regular financial disclosures and transparency in reporting are among the most critical criteria for evaluating companies listed in the Saudi financial market. Walaa Insurance is committed to publishing its quarterly and annual financial results on the Tadawul website, detailing revenue developments, profits, claims, and investments. The company also provides governance reports outlining the board structure, adopted policies, and risk management procedures. For investors, these disclosures offer an opportunity to analyze operational trends and assess the company's financial position's soundness. It is essential to monitor any changes in dividend policies, capital increases, or disclosures regarding new strategic projects, as these factors directly impact the stock's value and investment attractiveness.

Walaa Insurance's stock has experienced notable fluctuations during 2024, declining by approximately 28.5% since the beginning of the year until the latest observation, affected by the decrease in third-quarter profits and a broader market correction. Despite this decline, the stock's P/E ratio remains below the sector average, positioning it among value stocks that may attract some investors if operational performance improves in the future. On the other hand, the stock's price decline reflects the market's sensitivity to the company's quarterly results and highlights the importance of profit stability in enhancing investor confidence. Monitoring the company's news and official announcements on the Tadawul platform remains one of the most important tools for assessing stock developments and following its updates.

Local investment houses issue periodic reports on Walaa Insurance's stock performance, relying on the analysis of financial indicators, company policies, and sector developments. In the second quarter of 2025, some reports indicated a 'weight increase' rating for Walaa's stock with a cautious outlook on future profits. These analyses often emphasize revenue strength and growth in investment income, but with warnings about the impact of rising claims and operating expenses. It is recommended to rely on official sources such as the company's reports published on the Tadawul website and not to make any investment decisions based solely on recommendations, but to consult a licensed financial advisor to verify the stock's suitability for personal investment goals.