Special Reports

GCC Bourse Review

ALL EYES ON THE BOURSE

Thomas Schellen, head of insurance opportunities at ABQ Zawya, casts his eye over share price performances across the GCC and assesses how listed insurance companies fared in 2009.

With 10 days left in 2009, it was a timely question to ask: How did GCC-based insurers fare in a year that has been cataclysmic for many business expectations?

To look into this question, this column takes a peek at the performance of listed insurance companies in the Gulf region. It will try to determine positions of national sectors and companies through a triangulation process of sorts, examining share price developments with a supportive look at available net profits and underwriting profits for the first nine months of the year.

The jitteriness of equity markets in the past 18 months has demonstrated how easily financial investors get nervous these days and how much they favour companies that meet their expectations for financial returns. More often than not in today’s pecking order of investment decisions, this means share price gains of liquid stocks.

On the top layer of sector performance of insurance sectors in relation to the underlying benchmark general indices of their respective equity markets, the first picture emerges with ease.

Only three out of the six insurance sector indices on securities markets in the GCC achieved any gains in 2009 and just two markets saw relative outperformance of insurance when gauged against the general index.

Saudi bourse outperforms
As peak performer to its GCC peers, the Saudi Stock Exchange (SSE) is the indisputable winner when it comes to insurance sector share performance in 2009. While the TASI, the SSE benchmark index for listed stocks in Saudi Arabia, gained almost 30 per cent from the first trading session in January 2009 to its close on December 20, the insurance index did much better still.

Recording a gain of more than 84 per cent, the Saudi insurance index achieved an outstanding price return not only when compared with other sectors on the SSE and with insurance sectors tracked on other bourses in the GCC, the Levant, and North Africa, but also when compared with practically all sector indices that one can find in the Middle East. However, this meteoric performance of the Saudi insurance industry was an isolated phenomenon, very different for one thing from developments on the stock markets of the northern Gulf – Kuwait and Bahrain.

Kuwait and Bahrain
These markets were the underperformers of 2009 when it comes to general index trends in the GCC.
The Bahrain Stock Exchange (BSE) had to carry that red lantern for much of 2009 and its general index closed almost 20 per cent lower on December 20 versus the beginning of last year.

The general index of the Kuwait Stock Exchange (KSE), the region’s number two by market capitalisation, lost about 10 per cent in the same period.

However, investors in insurance on the BSE had a few more reasons to smile than those on the KSE, the performance differentials between insurance and general indices on the two bourses suggest.

With a drop of 15.6 per cent from the start of 2009, the BSE insurance index actually closed the period 3.6 percentage points better than its benchmark index.

Inversely, the performance of insurance on the KSE undercut the already unimpressive benchmark index by a full seven percentage points. It may be a tiny comfort that the real estate and investment sectors on the KSE were battered even a bit more than insurance, but overall it was not the year to achieve big returns from owning insurance shares in Kuwait.

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