The proposed mandatory health insurance will be a major growth driver for QLM Life & Medical Insurance Company (QLM), Qatar’s leading medical and life insurance company, according the QNB Financial Services (QNBFS) report.
The positive developments on the new mandatory health insurance system in February and April boosted QLM’s share price, leading the stock to outperform the QE Index by 53.5 percent since the IPO.
On February 24, the Cabinet’s approval of the draft law regulating healthcare services led QLM shares to reach a peak closing price of QR5.284 by March 2. Since then, the stock is consolidating, awaiting the Amiri Decree on the subject, said the report.
While the major parameters of the new scheme are yet to be announced, we expect the new mandatory health insurance to be initiated in 2022 and become fully operational in 2023. Therefore, we anticipate the number of insured employees in the Qatari health insurance system to increase by 0.96m in 2022 and an additional 0.95m in 2023. Consequently, we foresee QLM’s top and bottom lines to reflect the full positive impact of the new system by the end of 2023, the report stated.
While we expect the mandatory healthcare system to be operational in early 2022, we think there could be a transition period for the companies to adapt to the new system. Therefore, we modeled in a 50 percent implementation rate in 2022 and 100 percent in 2023, it added.
The report said, we anticipate the basic mandatory health insurance product to be priced at QR800 for residents and QR150 for tourists. We observe many expat families still use tourist visas during their stay in Qatar; therefore, higher premiums for longer durations may create a further upside to our forecasts.
Currently, some large companies and most of the local SMEs do not provide private health insurance to their employees.
Therefore, the introduction of the mandatory health insurance should increase the number of members in the local health insurance system by four to five times. Besides, the new law obliges visitors to have health insurance as well, which is likely to create a lucrative new market for QLM especially in 2022, as Qatar is expected to welcome 1.7m visitors for the FIFA World Cup 2022, the report said.
While the law is still not finalised and the details such as the coverage and price of the basic products are still not available, according to QNBFS report, QLM’s net will earnings to increase to QR129.5mn by 2023, implying a 32.1 percent rise over 2020, based on conservative assumptions.
“QLM’s financial strength and its top-notch profitability should allow the company to maintain its growth while paying generous dividends to its investors. QLM intends to distribute 40 to 60 percent of its earnings as dividends annually. We initiate coverage for QLM shares with an accumulate rating and our target price implies 10.8 percent upside potential,” the report noted.
According to the report, the segment generated 82 percent of QLM’s Gross Written Premiums (GWP) in the first quarter of 2021, while the rest (18 percent) was realised by the Group & Credit Life segment. QLM enjoys GCC’s most comprehensive network of medical providers, operating in 103 countries along with its state-of-the-art IT system that enhances its customer experience, resulting in more than 90 percent policy renewal rates in Qatar.
On growth prospects through life insurance & new retail products, the report said, QLM’s insurance license allows the company to deal directly with retail customers. Therefore, QLM believes that it will be able to tap the local market with a wider product range in the coming periods. QLM is currently in the process of rolling out new products targeting retail customers.
