Armenian insurance sector profit decreased by 33% in 2023

ArmInfo. The net profit of the insurance sector of Armenia dropped by 33% in 2023, after a 4.5-fold  increase in 2022. "This resulted from higher reimbursement growth of 30% with a modest 17% increase in premiums.

A year ago, on the contrary, premiums grew rapidly, while reimbursements almost  stagnated," ArmInfo analysts say.  According to the data of the  Financial Rating of Insurance Companies of Armenia as of December 31,  2023, prepared by ArmInfo IC, in Q4 2023 alone, the insurance  industry recorded a loss of 663.7 million drams ($1.6 million),  against a profit of 637 million drams in Q3 and a positive 292.8  million drams in the Q4 2022.

Of the six insurance companies, only one insurance company, Armenia  Insurance, completed the quarter with a profit, while significantly  reducing it. Four companies went from profit to loss, and one  remained in loss, greatly reducing it. The loss of the new  participant represented by the EFES insurance company increased  10-fold, which in its case is quite explainable by its relatively  recent appearance on the insurance market (from the end of July  2023). As a result, at the end of 2023, the net profit of the  insurance sector amounted to 2.6 billion drams ($6.4 million),  premiums exceeded 71 billion drams (about $176 million), and  compensation reached 38.1 billion drams ($94.2 million).  Analysts  note that such a downward trend in profit is associated with high  growth rates of claims for such classes as property insurance, cargo  transportation, compulsory motor liability insurance, voluntary motor  insurance, agricultural risk insurance and medical insurance.  The  leader with net profit in 2023 was "Armenia Insurance", 765.3 million  drams, displacing Nairi Insurance to second polace - 653 million, and  pushing INGO Armenia to third place- 613.9 million, and LIGA  Insurance was in fourth place- 378.7 million , the fifth and sixth  places continue to be occupied by REGO Insurance and Sil Insurance -  319 million and 149 million, respectively, and the last seventh place  is occupied by a new market participant, EFES Insurance Company, with  a loss of 300.7 million drams. Only three of these insurance  companies were able to increase their profits during the year (by  3.5-75%), while the profits of the other three decreased (by 35-51%).

Meanwhile,  "LIGA Insurance" is the leader in terms of the volume of  insurance premiums and indemnities, which, while continuing to  increase fees  moderately, improved the dynamics of payments from  recession to high growth, which did not best affect the annual profit  trend, which after a significant increase in 2022 began to decline in  2023. Following, the second and third places are occupied by INGO  Armenia and Nairi Insurance, which, having greatly accelerated the  growth of reimbursements, significantly worsened the dynamics of  premiums, in particular INGO Armenia with a reversal from  double-digit growth to decline, and Nairi Insurance with a noticeably  slowdown in growth rates, which of course greatly reduced the profits  of both companies.

There are organizations in the insurance market of Armenia that are   affected by anti-Russian sanctions. In 2022, the Russian parent   companies of Armenian insurance companies were included in the   sanctions list.  As a result, a reorganization process began in the   market. Already in December 2022, the companies RESO and Rosgosstrakh  Armenia went to rebranding, and earlier to a change in the   composition of shareholders, being re-registered as REGO Insurance   and LIGA Insurance. The Armenian subsidiary of the Russian  Ingosstrakh company is also  going through a slightly different path  of reorganization with the  spin-off of its client base. It is not  yet known whether Ingosstrakh intends to leave the Armenian market.

It should be noted that in the insurance market of Armenia there are  organizations affected by anti-Russian sanctions. In 2022, the  Russian parent structures of Armenian insurance companies were  included in the sanctions list. As a result, a reorganization process  began in the market. Already in December 2022, the former companies  RESO and Rosgosstrakh Armenia underwent a structural reorganization  of capital and rebranding, re-registering as REGO Insurance and LIGA  Insurance. The Armenian subsidiary of the Russian company  Ingosstrakh, from which the Efes insurance company grows, is also  taking a slightly different path of reorganization with the spin-off  of its client base. It is not yet known whether the Ingosstrakh  company itself intends to leave the Armenian market.

There are already 7 companies operating in the insurance market of  Armenia, which operate in 18 of the available 20 classes of  insurance, with the exception of liability insurance for the use of  railway transport and insurance of judicial and extrajudicial  expenses. Only 3 companies operate in the agricultural risk insurance  class - LIGA Insurance, INGO Armenia and Sil Insurance. Only Armenia  Insurance is licensed for railway transport insurance. The largest  number of classes are licensed by "INGO Armenia" and Armenia  Insurance - 16 and "LIGA Insurance" - 15. (The calculated exchange  rate of the dram against the dollar as of December 31, 2023 was  404.79 AMD/$1).