Salama has announced this morning on Tadawul that its actuary has issued a report on Thursday, 15 March, requiring the insurer to book additional SAR2.25mn technical reserves for FY17. Salama will consequently restate its 2017 financial statements to account for the extra technical reserves required. 
 
Our view: The reserve build-up is relatively minor and will lead to a 3.3% decline in 2017 profit post-restatement, representing 0.3% of NEP and 0.9% of shareholders’ equity in 2017. Salama is the fourth Saudi Arabian insurer to announce on Tadawul a need to beef-up its technical reserves, following Tawuniya (on 31 Jan 2018), Malath (last Thursday) and Wala’a (yesterday). Salama had reported a FY17 net profit before zakat of SAR68mn, which we expect will decline by 3.3% to SAR65mn post-restatement of its FY17 financials to include the SAR2.25mn extra technical reserves. Loss ratio will slightly worsen by 33bps to 74.1% post-restatement, compared to 73.7% previously. Salama is primarily a motor-focused player (86% of its 2017 GWP is from motor); hence, the motor segment might be the key driver of the additional reserve requirement.