2023 saw a broad recovery in the healthcare insurance sector from 2022 with notable growth in premiums and contribution figures despite a surge in medical inflation and claims. Results were further supported by strong investment income results which benefited from the high interest rate environment.

Bupa Arabia continued generating very good financial results in 2023 with a 20% growth in GWP to SR 16.7 billion, and 15.2% growth in profit before zakat and tax to SR 1.12 billion.

Revenues and segment contribution

Bupa Arabia maintained its market leadership position within the healthcare insurance sector. In addition to healthy increases in new members, GWP growth was driven by price increases to minimize the impact of unprecedented medical inflation levels.

Bupa Arabia has witnessed double-digit growth across the corporate and SMEs portfolios while continuing to have a customer base that is more dominant in the corporate sector.

Geographical analysis of gross written premiums

Costs and earnings

similar to last year, 2023 continues to show a surge in insurance service expenses driven mainly by medical claims. Despite that, the insurance revenue has increased in a similar manner to catch up with this influx of claims.

Separately, net profit before zakat and tax grew by 15.2% which was principally driven by business growth and increase in insured lives.

Return to shareholders

In 2023, Bupa Arabia reported a 16.70% growth in earnings per share (EPS) to SR 6.29 compared to SR 5.39 in 2022, supported by record earnings. Moreover, the Board of Directors has approved dividend distribution of SR 3.6 per share for the fiscal year 2022.

* Investment income is lower from last year by 7% owing to a one off equity sale transaction in 2022 that resulted in substantial capital gains. As far as recurring income is concerned, investment income in 2023 remained higher owing to prevailing higher rates.

In 2023, Bupa Arabia issued its first Consolidated Financial Statements under the new standards IFRS 17 “Insurance Contracts” and IFRS 9 “Financial Instruments” as endorsed in the Kingdom of Saudi Arabia. Bupa Arabia was one of the first companies globally to publish its IFRS 17 and IFRS 9 results. Therefore, due to the changes we are showing below a three-year summary under IFRS 4 (for the previous years before 2022) and a two-year summary under IFRS 17 (for the years 2022 and 2023).

Three-year summary – IFRS 4

Statement of operations (12 Months)	2019 SR ’000	2020 SR ’000	2021 SR ’000
Gross written premiums (GWP)	10,410,868	10,447,353	11,382,194
Net earned premiums (NEP)	9,371,291	10,734,482	10,617,715
Total revenue	9,630,246	10,979,020	10,920,727
Gross claims paid	7,655,078	8,262,050	9,114,251
Net claims incurred (NCI)	7,749,297	8,719,928	9,046,569
Total expenses	1,101,460	1,355,283	1,085,117
Surplus from insurance operations	668,341	801,410	583,469
Shareholders’ net income before zakat and income tax	712,654	823,669	730,701
Loss ratio	82.69%	81.23%	85.20%
Earnings per Share (EPS)*	3.98	4.66	4.18

* EPS were adjusted retrospectively for the increase in outstanding shares due to the issuance of bonus shares in 2022.

Two-year summary – IFRS 17

Statement of operations (12 Months)	2022 SR ’000	2023 SR ’000
Gross written premiums (GWP)	13,896,883	16,668,744
Insurance revenue	12,873,111	15,887,715
Insurance service expense	(12,206,033)	(14,994,432)
Net expenses from reinsurance contracts held	(29,450)	(28,246)
Net insurance service result	637,628	865,037
Net investment results	552,134	513,276
Income attributed to the shareholders before zakat and income tax	969,163	1,116,679
Earnings per Share (EPS)*	5.39	6.29

* EPS were adjusted retrospectively for the increase in outstanding shares due to the issuance of bonus shares in 2022.

Summary of financial position (assets) – IFRS 4

Assets	2019 SR ’000	2020 SR ’000	2021 SR ’000
Cash and cash equivalents	665,709	633,251	960,758
Term deposits	5,063,976	2,796,547	3,093,720
Investments	1,840,832	6,029,446	5,703,773
Prepayments and other assets	276,643	85,086	113,254
Premiums receivable – gross	1,886,564	1,542,567	1,992,656
Allowance for doubtful premiums receivable	–197,187	–222,524	–231,356
Premiums receivable – net	1,689,377	1,320,043	1,761,300
Reinsurer’s share of unearned premium	20,625	20,108	27,935
Reinsurer’s share of outstanding claims	5,190	7,936	15,036
Deferred policy acquisition costs (DAC)	134,022	68,214	201,042
Amount due from insurance operations	–	–	–
Goodwill	98,000	98,000	98,000
Tangible and intangible assets (prev. furniture, fittings and equipment)	225,686	265,977	249,664
Accrued interest on statutory deposit	10,820	13,806	14,885
Statutory deposit	120,000	120,000	120,000
Deferred tax asset	30,216	37,941	39,735
Total assets	10,181,096	11,496,355	12,399,102

Summary of financial position (assets) – IFRS 17

Assets	2022 SR ’000	2023 SR ’000
Cash and cash equivalents	1,287,961	1,255,896
Reinsurance contract assets	28,155	74,090
Prepaid expenses and other assets	410,519	475,475
Term deposits	6,406,848	7,223,011
Financial assets at amortized cost – net	526,188	587,360
Financial assets at fair value	2,852,234	4,246,757
Fixtures, furniture and equipment – net	63,643	69,879
Deferred tax asset	40,511	38,609
Due from related parties	3,316	–
Right-of-use assets – net	165,947	143,388
Intangible assets – net	65,413	67,236
Statutory deposit – net	149,961	149,960
Accrued income on statutory deposit	16,235	8,690
Goodwill	98,000	98,000
Total assets	12,114,931	14,438,351

Bupa Arabia’s total assets have seen a steady growth, reflecting its strong and expanding business activities. Total assets in 2023 grew by 19% to SR 14.4 billion with a strong net insurance service results reflected in the increase in investments and in term deposits.

Summary of financial position (liabilities and equity) – IFRS 4

Liabilities	2019 SR ’000	2020 SR ’000	2021 SR ’000
Unearned premiums (UEP)	4,376,219	4,023,331	4,709,555
Outstanding claims provision (OCP)	1,627,708	2,109,319	2,111,455
Reinsurance balance payable	54,413	4,873	25,397
Accrued expenses and other liabilities	545,028	816,062	882,393
Amount due to shareholders’ operations	–	–	–
Policyholders’ share of surplus from insurance operations	168,454	200,391	190,060
Accrued zakat and income tax	274,709	317,199	236,610
Accrued interest on statutory deposit	10,820	13,806	14,885
Amount due to related parties	78,848	108,521	33,723
Total liabilities	7,136,199	7,593,502	8,204,078
Total equity	3,044,897	3,902,853	4,195,024
Total liabilities and equity	10,181,096	11,496,355	12,399,102

Summary of financial position (liabilities and equity) – IFRS 17

Liabilities	2022 SR ’000	2023 SR ’000
Accrued and other liabilities	869,451	1,087,412
Insurance contract liabilities	6,699,185	8,267,196
Reinsurance contract liabilities	2,605	–
Due to related parties	–	40,935
Provision for zakat and income tax	326,566	358,589
Accrued income payable to insurance authority	16,235	8,690
Total liabilities	7,914,042	9,762,822
Total equity	4,200,889	4,675,529
Total liabilities and equity	12,114,931	14,438,351

Total liabilities grew by SR 1.8 billion in 2023 to SR 9.7 billion, due to the increase in insurance contract liabilities, while total equity grew by SR 474.6 million to reach SR 4.6 billion, supporting a strong solvency position well above regulatory thresholds.

Statutory payments and payable to regulatory bodies

Description	Paid		Paid change	Payable		Payable change
	2022 SR ’000	2023 SR ’000	2022 vs 2023 SR ’000	2022 SR ’000	2023 SR ’000	2022 vs 2023 SR ’000
ZATCA: Zakat and income taxes	74,770	142,591	67,821	326,566	358,589	32,023
ZATCA: Value added tax (VAT)	728,158	946,581	218,423	116,160	311,464	195,304
ZATCA: Withholding taxes (WHT)	25,226	32,604	7,378	8,253	10,877	2,624
Zatca: Total	828,154	1,121,776	293,622	450,979	680,930	229,951
SAMA: Levies	67,505	82,013	14,508	12,484	13,814	1,330
CHI: Levies and license fees	135,009	164,026	29,017	24,968	27,629	2,661
Total: Levies and license fees	202,514	246,039	43,525	37,452	41,443	3,991
CMA/Tadawul: Service and license fees	1,418	1,528	110	–	434	434
GOSI	35,971	40,554	4,583	3,347	4,063	716
Accrued income on statutory deposit	–	16,235	16,235	16,235	8,690	7,545
Total	37,389	58,750	21,361	19,582	12,753	8,261

Zakat, Tax and Customs Authority: Zakat and income tax (ZATCA)

Total zakat and income tax payments during 2023 were SR 142.5 million, of which SR 74.8 million was for the 2022 tax and zakat returns and SR 67.7 million for 2023 advance tax.

Bupa Arabia paid SR 946.5 million in 2023 to ZATCA for VAT payments with SR 311 million VAT payable at the end of the year. Additionally, SR 32.6 million was paid during 2023 for withholding taxes, and SR 10.8 million provided in the 2023 results was related to withholding taxes payable in 2024.

The SR 680.9 million payable to the ZATCA includes SR 174.6 million payable in 2024 for 2023 zakat and tax returns, while the remainder is predominantly additional provisions for zakat matters.

Saudi Central Bank (SAMA)/Insurance Authority

Total levies paid to SAMA/IA during 2023 were SR 82.0 million, of which SR 12.4 million were for the fourth quarter of 2022 while SR 69.5 million were for the three quarters of 2023. The SR 13.8 million payable amount for 2023 includes the normal provisioning for Q4 2023.

During 2023, Bupa Arabia has released the accrued income on statutory deposit to SAMA/IA up to 31 December 2022 amounting to SR 16.24 million. The remaining SR 8.69 million payable amount related to the year 2023.

Council of Health Insurance (CHI)

Total levies paid to the CHI for 2023 were SR 164.0 million, of which SR 24.9 million were for the settlement of Q4 levies of 2022, and SR 139.0 million were for the first three quarters of 2023. The SR 27.6 million payable amount for 2023 includes the normal provisioning for Q4 2023.

The General Organization for Social Insurance (GOSI)

Total 2023 payments to GOSI were SR 40.5 million, of which SR 3.3 million was related to 2022. An amount of SR 4.1 million was provided for, reflecting 2023 related GOSI commitments, which are payable in 2024.

Tadawul and the Capital Market Authority (CMA)

The Company paid SR 1.5 million to Tadawul/CMA during 2023, which included SR 400 thousand for service fees, SR 1 million for annual listing fees, and SR 128.4 thousand for other fees. The SR 434 million payable amount for 2023 was related to basic registration.

Regulatory penalties

During 2023, the Company paid to Insurance Authority/SAMA and CHI total regulatory penalties of SR 345,200.

Dividends and the Company’s policy for the distribution of profits

The Company’s By-Laws state the following with respect to the calculation and distribution of profits:

1. The exclusion of zakat and income tax
2. That 20% of net profits are allocated to form a statutory reserve. The General Assembly has the authority to cease this transfer once the statutory reserve is equivalent to the paid-up capital of the Company
3. Based on the Board’s recommendation, the General Assembly can also hold a percentage of the annual net profit to form a reserve and may allocate it to purposes of its choosing
4. The balance shall be distributed as a first payment amounting to no less than 5% of paid-up capital to the shareholders
5. The remaining balance shall be distributed to the shareholders as a share in the profits or transferred to the retained profits account
6. The Board may issue a decision to distribute periodical profits to be deducted from annual profits as specified in point 4 above, and in accordance with the relevant regulatory rules issued by the concerned authorities

Dividend history – Last five fiscal years

Description	2018 SR ’000	2019* SR ’000	2020 SR ’000	2021 SR ’000	2022 SR ’000
Retained income (pre-zakat and inc. taxes)	525,431	712,654	823,669	730,701	969,163
Dividend amount	180,000	0	408,000	540,000	540,000
Pre-zakat and inc. Taxes dividend pay-out ratio	34.3%	N/A	49.5%	74.0%	55.0%
Number of shares in issue	120,000	120,000	120,000	120,000	150,000
Saudi Riyals dividends per share	1.50	N/A	3.40	4.50	3.60
Distribution period	2019	N/A	2021Q3	2022Q3	2023Q3

* No dividends were declared in 2020 due to the uncertainties surrounding COVID-19.

In 2022 Bupa Arabia increased its capital to SR 1,500 million by capitalizing SR 300 million from the retained earnings account, thereby increasing the capital by 25%, and thereby increasing the number of shares to 150 million shares by offering one bonus share for every four shares owned.

In addition to the distribution of profits requirements, as reflected within the Company By-Laws (Articles of Association), the Company Dividend Policy is as reflected below.

To distribute any excess cash as dividends to shareholders subject to:

• Maintaining a solvent position at the end of each quarter as per local laws and regulations,
• Receiving the requisite regulatory and shareholder approvals for the dividend(s) wherever applicable and, having accounted for the Company’s requirements in meeting its Capital Management Policy and relevant risk management policies; policies that cover the business and investment requirement.