Yassir ALBAHARNA, CEO, ARIG - Bahrain

20 March 2015 — Alexandru CIUNCAN
yassir_albaharnaXPRIMM: How can you evaluate ARIG's results for 2014?
Yassir ALBAHARNA:
ARIG achieved net profits of USD 15.6 million for the Group during its 2014 Financial Year. The majority of ARIG's reinsurance portfolio performed well in a challenging market, where we have seen risk premiums reducing year by year. Apart from the underwriting result, we are pleased to see our investment result holding up, while we are pursuing a strategy that protects our stakeholders' capital. Regrettably, and in spite of measures taken in the past, TAKAFUL Re, one of our subsidiaries writing purely Islamic (Shariah compliant) business, continues to be a drag on the Group's performance.

XPRIMM: Which is the geographical distribution of your underwritings?
Y.A.:
Across the year, ARIG's focus revolves around maintaining strict underwriting discipline to remain firmly set on the quality of the existing portfolio. With that in mind, 2014 was marked with a slight territorial shift whereas predominant targets were the significantly more attractive markets for the year. The premium share for the Group emanating from the Middle East and Asia was reduced from 39% to 35% and from 26% to 19% respectively. The share of business generated from the London Lloyd's market increased from 23% to 37% (compared to 2013). In Africa, a number of underperforming accounts were discontinued. Underpinning factor was the reduction in premium, due to the political instability in parts of North Africa. Subsequently, the premium share generated by the African region decreased from 12% in 2013 to 9% in 2014. Regarding CIS & CEE countries, despite our premium share is still below 1% of the overall operation's portfolio, these countries present new opportunities to ARIG with a great potential in the future.

XPRIMM: What are the main advantages of the reinsurance solutions or products offered by the ARIG for the Russian & CIS & CEE countries?
Y.A.:
Not only does ARIG fulfill a reinsurer's obligation of providing capacity, but in doing so, it brings along 34 years of experience. Historically, ARIG has had interests worldwide. Russia, the CIS and CEE markets allow for sharing of knowledge, experience and ideas as to how to best tackle the challenges the industry is facing today and the foreseeable future. By virtue of no simple luck or necessity, the team members involved in the underwriting process have connections in the region and extensive knowledge both geographically and culturally. Having someone with a good command of the local language is an added bonus, but in essence, the key element is to add value to the business partners across the table. Extending technical support in the form of pricing, underwriting, accounting, along with invitations for client workshops in Bahrain build solid grounds for enhancing the sound business relationships in place and ultimately strengthens the bridge between the Middle East and the CIE/CEE region.

XPRIMM: Can you give us more details about your activity in the countries of the CEE&CIS region? What are the countries on which you reported the best results in 2014 and what countries you consider to have the highest growth potential in 2015? How do you characterize the CEE and CIS insurance region, respectively, in terms of challenges and opportunities?
Y.A.:
Thus far, ARIG's strategy in the CEE & CIS region is to target conventional lines for both Treaty and Facultative. The focus is on Property, Engineering, Cargo (treaty and fac) and Hull (fac only). Needless to say, ARIG's underwriters are keen on expanding their specialty lines and assess offers on their own merit. In terms of capacity, ARIG offers carefully tailored limits.

Outside the Russian Federation, ARIG's involvement is greatest in Romania with a more modest footprint in markets within the region, mainly on Facultative basis. In Russia, solid relationships are nurtured with some of the grand insurers such as INGOSSTRAKH and SOGAZ. Others worth a mention are RESO GARANTIA, KAPITAL Ins., EURO Policy, and the newly acquired SOGLASIE Ins. Habitually, queries are made as to what opportunities might materialize, and subsequently the communication with intermediaries has elevated to the next echelon.

On profitability, although Russia dominates in terms of premium production, some of ARIG's clients unfortunately suffered lately a few rather large market losses. Subsequently, due to these adverse events, the market was rendered the least profitable within the CEE/CIS regional portfolio. However, like many other reinsurers nowadays, it is imperative that ARIG withstands the increasing pressures and navigate within the prevailing soft market environment. It is essential to react fast, be adaptable and innovative. Meeting the challenges ahead is not easy, but with the cyclical nature of the industry, there is always the notion that the market will, sooner than later, stabilize. With that in mind, ARIG's approach in Russia and the CEE/CIS region remains one of providing continuous support and is arguably motivated by the belief that these regional markets have a great potential in the future.

XPRIMM: What is the strategy of development of ARIG for the 2015 in respect of these markets? Are your plans affected by the current geo-political climate?
Y.A.:
With respect to the CIS/CEE territories, the strategy remains unchanged with devising means to expand ARIG's footprint and to grow our existing book, which currently spans across mainly conventional lines of insurance, and the goal, undoubtedly, is to build the knowledge on lines other than those.

In Russia, inadvertently or not, the government finds itself in a predicament which affects all aspects of the financial industry, including the insurance and reinsurance spectrum. Nevertheless, the stance for ARIG is to continue providing support for the foreseeable future and to diversify the existing portfolio however deemed appropriate. Without a shadow of a doubt, politics in Russia have an adverse effect both domestically and internationally.

With respect to the newly imposed sanctions, it should be emphasized that ARIG operates a fully owned subsidiary in the London market and therefore it is required to observe EU sanctions in addition to UN sanctions which are applicable to our home regulator in Bahrain. Strategically, this hampers the volume of growth and undermines the set ambitions in Russia to their full extent.

XPRIMM: As an international re-insurance company, how do you adapt your products and services to the different social and cultural contexts of the various regions on which you activate?
Y.A.:
We are quite clear of our strengths in the current geographies we have identified. I think this focus is needed. The ability to know your strength and understand that each market is different and has different requirements can be the difference between success and failure. Today, our experience, knowledge and understanding of the markets where we operate are our strengths.

Geographical expansion is an important risk diversification tool for any reinsurance company. At ARIG, we already service the most dynamic economies of today throughout Afro-Asia. We have a physical presence in Asia through our branches in Singapore and Labuan and in Africa through our representative office in Mauritius. In addition, ARIG has a standing participation in global reinsurance through its sharing in Lloyd's business which has become a leading source of business for the company.

Within its markets, ARIG is recognized for its consistently high professional standards and a customer focused approach. The company writes a diversified portfolio of Life and Non-Life covers. Sharing expertise and providing flexible and comprehensive support to its clients has earned ARIG a level of customer loyalty and satisfaction that well exceeds the industry average.

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