THE LEBANON BRIEF - Home | BLOM Bank Egypt · 2018. 5. 23. · The Lebanon Brief Page 3 of 14 ISSUE 847; Week of 02 - 07 December 2013 SAL FINANCIAL MARKETS Equity Market Stock Market

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THE

LEBANON BRIEF

ISSUE 847

Week of 02 – 07 December, 2013

ECONOMIC RESEARCH DEPARTMENT

Rashid Karame Street, Verdun Area

P.O.Box 11-1540 Beirut, Lebanon

T (01) 747802 F (+961) 1 737414

[email protected]

www.blom.com.lb

S A L

The Lebanon Brief Table Of Contents Page 2 of 14

ISSUE 847; Week of 02 - 07 December 2013

S A L

TABLE OF CONTENTS

FINANCIAL MARKETS 3

Equity Market 3

Foreign Exchange Market 5

Money & Treasury Bills Market 5

Eurobond Market 6

ECONOMIC AND FINANCIAL NEWS 7

IMF Lowers Lebanon’s Real GDP Growth Projection to 1.5% in 2013 7

BDL’s Total Assets Slip by 0.7% to $78.29B up to November 7

BLOM Lebanon Purchasing Managers’ Index (PMI) Declines to 45.1 in November 8

Lebanon Ranks 127th on the Corruption Perception Index 2013 8

Consumer Confidence Index (CCI) falls to 51 points in November 9

BDL Gathers Data on Foreign Direct Investment (FDI) 9

CORPORATE DEVELOPMENTS 10

Bank Audi S.A.E’s Profit Rose to $42.32M up to September 10

ODEABANK Posts a Loss of $54.63M up to September 10

FOCUS IN BRIEF 11

Lebanon's Insurance Sector Struggles amid Sluggish Economy 11

This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be

reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a

solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken on

the basis of information contained herein are solely the responsibility of the recipient.

The Lebanon Brief Page 3 of 14


S A L

FINANCIAL MARKETS

Equity Market

Stock Market

6/12/2013 29/11/2013 % Change

BLOM Stock Index* 1,154.06 1,160.66 -0.57%

Average Traded Volume 39,328 82,155 -52.13%

Average Traded Value 683,270 904,517 -24.46% *22 January 1996 = 1000

The uncertainty surrounding security clashes in the

Northern city of Tripoli in addition to the delay in the

formation of a new cabinet continued to weigh negatively

on investors’ sentiment. This was reflected by a lower

trading activity on the Beirut Stock Exchange (BSE)

during the past week, with the daily average volume

reaching 39,328 shares worth $683,270 compared to last

week’s average daily volume of 82,155 shares, worth

$904,517.

The BLOM Stock Index (BSI) that tracks listed equities

on the BSE, reached a high of 1,159 on Wednesday 04

December but closed at its lower band of 1,154.06 points

on Friday 06 December, registering a 0.57% decline from

the previous week. As for the market capitalization, it fell

by $52.78M to reach $9.24B.

When comparing to regional and emerging markets, the

Lebanese equity benchmark outperformed the MSCI

Emerging Index that dropped by 1.34% to close by Friday

at 998.45 points. S&P Pan Arab Composite LargeMidCap

index retreated by 0.12% to 129.67 points, while the S&P

AFE40 edged up by a weekly 0.29% to 62.48 points.

Egypt, Abu Dhabi and Dubai bourses topped Arab

markets this week posting respective increases of 2.39%,

2.33% and 2.29%. In contrast, Saudi Arabia and Bahrain

were the biggest losers this week with drops of 0.98% and

0.91%, respectively.

Banking stocks weighed the most on the BSE’s activity,

accounting for 69.95% of the total value traded. In details,

Audi and Byblos listed stocks declined 1.27% and 1.90%

to $6.21 and $1.55, respectively.

BLOM Preferred Shares Index (BPSI) inched 0.02% up to

105.17 points, helped by an increase in BEMO preferred

shares 06 and Byblos preferred shares 09 that added

0.50% and 0.10% to $100.50 and $101.10, respectively.

On the London Stock Exchange, BLOM and Audi’s GDR

shares slipped by 0.56% and 1.44% to close at $8.80 and

$6.50, respectively. Solidere A shares also decreased by

0.71% to close at $11.17.

Banking Sector

Mkt 6/12/2013 29/11/2013 %Change

BLOM (GDR) BSE $8.80 $8.80 0.00%

BLOM Listed BSE $8.25 $8.25 0.00%

BLOM (GDR) LSE $8.80 $8.85 -0.56%

Audi (GDR) BSE $6.73 $6.73 0.00%

Audi Listed BSE $6.21 $6.29 -1.27%

Audi (GDR) LSE $6.50 $6.60 -1.44%

Byblos (C) BSE $1.55 $1.58 -1.90%

Byblos (GDR) LSE $71.00 $71.00 0.00%

Bank of Beirut (C) BSE $19.00 $19.00 0.00%

BLC (C) BSE $1.95 $1.95 0.00%

Fransabank (B) OTC $28.00 $28.00 0.00%

BEMO (C) BSE $1.84 $1.84 0.00%

Mkt 6/12/2013 29/11/2013 %Change

Banks’ Preferred

Shares Index *

105.17 105.15 0.02%

BEMO Preferred 2006 BSE $100.50 $100.00 0.50%

Audi Pref. E BSE $102.50 $102.50 0.00%

Audi Pref. F BSE $102.50 $102.50 0.00%

Byblos Preferred 08 BSE $100.00 $100.00 0.00%

Byblos Preferred 09 BSE $100.00 $100.00 0.00%

Bank of Beirut Pref. E BSE $100.50 $100.50 0.00%

Bank of Beirut Pref. I BSE $101.10 $101.00 0.10%

Bank of Beirut Pref. H BSE $26.00 $26.00 0.00%

BLOM Preferred 2011 BSE $26.00 $26.00 0.00%

* 52 August 2006 = 100

1050

1100

1150

1200

1250

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13

BLOM Stock Index HI: 1,227.46

LO: 1104.42



S A L

Real Estate

Mkt 6/12/2013 29/11/2013 % Change

Solidere (A) BSE $11.26 $11.34 -0.71%

Solidere (B) BSE $11.28 $11.44 -1.40%

Solidere (GDR) LSE $11.17 $11.25 -0.71%

The political tensions in the north of the country

weighed negatively on the performance of Solidere

stocks with Solidere Class A declining by 0.71% to

$11.26, while its B counterpart retreated by 1.40% to

$11.28.

Manufacturing Sector

Mkt 6/12/2013 29/11/2013 % Change

HOLCIM Liban BSE $14.48 $14.48 0.00%

Ciments Blancs (B) BSE $3.25 $2.90 12.07%

Ciments Blancs (N) BSE $3.24 $3.24 0.00%

With respect to the manufacturing sector, Ste Ciments

Blancs class B shares jumped 12.07% to $3.25.

Looking forward, the BSE’s activity is likely to remain

slow as investors will maintain their wait and see

approach, hoping that the recent calm down in the

northern part of the country brings some positive vibes

to the stock market.

Funds

Mkt 6/12/2013 29/11/2013 % Change

BLOM Cedars Balanced

Fund Tranche “A” ----- $6,961.13 $6,956.01 0.07%


Fund Tranche “B” ----- $5,073.29 $5,067.24 0.12%


Fund Tranche “C” ----- $5,287.03 $5,283.14 0.07%

BLOM Bond Fund ----- $9,724.12 $9,724.12 0.00%

Retail Sector

Mkt 6/12/2013 29/11/2013 % Change

RYMCO BSE $3.50 $3.50 0.00%

ABC (New) OTC $33.00 $33.00 0.00%

Tourism Sector

Mkt 6/12/2013 29/11/2013 % Change

Casino Du Liban OTC $480.00 $480.00 0.00%

SGHL OTC $7.00 $7.00 0.00%



S A L

Foreign Exchange Market

Lebanese Forex Market

6/12/2013

29/11/2013

%Change

Dollar / LP 1,508.00 1,505.00 0.20%

Euro / LP 2,060.30 2,051.41 0.43%

Swiss Franc / LP 1,682.48 1,665.19 1.04%

Yen / LP 14.75 14.74 0.07%

Sterling / LP 2,465.97 2,460.69 0.21%

NEER Index** 128.10 128.16 -0.05%

*Close of GMT 09:00+2 **Nominal Effective Exchange Rate; Base Year Jan 2006=100

**The unadjusted weighted average value of a country’s currency relative to all major

currencies being traded within a pool of currencies.

Demand for the US dollar edged up over the past week as the range at

which banks exchanged the currency went from $/LP 1,503 -$/LP

1,507, with a mid-price of $/LP1, 505 to $/LP 1,506- $/LP 1,510 with

a mid-price of $/LP 1,508. Foreign assets (excluding gold) at the

Central Bank stood at $35.49B as of end November compared to

$35.63B as of end October. Meanwhile, the dollarization rate of

private sector deposits steadied at 65.7% in September.

Nominal Effective Exchange Rate (NEER)

The euro recorded yet another gain against the dollar as investors do

not foresee any further cuts in the European Central Bank’s rate.

Confidence in the euro is also being boosted by reports showing that

the Eurozone’s inflation is trending upwards.

By Friday December 06th, 2013, 12:30 pm Beirut time, the euro

closed at €/$ 1.37 up by a weekly 0.43%. As for the dollar-pegged LP,

it depreciated to €/LP 2,060.30 from €/LP 2,051.41 recorded on

November 29th. The Nominal effective exchange (NEER) slipped by

0.05% over the cited period to 128.10 points, while its year-to-date

performance stood at 23.40%.

Money & Treasury Bills Market

Money Market Rates

Treasury Yields

6/12/2013 29/11/2013 Change bps

3-M TB yield 4.39% 4.39% 0

6-M TB yield 4.87% 4.87% 0

12-M TB yield 5.08% 5.08% 0

24-M TB coupon 5.84% 5.84% 0

36-M TB coupon 6.50% 6.50% 0

60-M TB coupon 6.74% 6.74% 0

6/12/2013 29/11/2013 Change bps

Overnight Interbank 2.75 2.75 0

BDL 45-day CD 3.57 3.57 0

BDL 60-day CD 3.85 3.85 0

During the week ending 21st of November, broad Money M3

increased by LP212B ($141M), to reach LP 164,693B

($109.25B).M3 growth rate reached 6.32% on a year-on-year basis

and 4.28% from end of December 2012. As for M1, it fell by LP87B

($58M) due to the downturn of LP116B ($77M) in currency in

circulation and the LP29B ($19M) rise in demand deposits. Total

deposits (excluding demand deposits) grew by LP299B ($198M),

given the LP141B rise in term and saving deposits in domestic

currency and the $105M growth in deposits denominated in foreign

currencies. Over the above mentioned period, the broad money

dollarization rate edged up from a previous 59.05% to reach 59.07%.

According to the Central Bank, the overnight interbank rate stood at

2.75% at the end of September 2013.

In the TBs auction held on November 28th, the Ministry of Finance

raised LP161B ($107M) through the issuance of 1 Year (1Y), 2Y and

3Y Treasury Bills. The highest demand was witnessed on the 3Y

notes, capturing 62% of total subscriptions, while the 1Y and 2Y

notes captured respective shares of 14% and 24%. The average

discount rate for the 1Y notes stood at 5.08% while the coupon rate

for the 2Y and 3Y notes registered 5.84% and 6.50%, respectively.

Maturing T-bills exceeded new subscriptions by LP11B ($7M).

99

104

109

114

119

124

129

134

Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13



S A L

Eurobond Market

Eurobonds Index and Yield

50/21/2013 12/22/2013 Change Year to Date

BLOM Bond Index (BBI)* 105.480 105.463 0.02% -3.28%

Weighted Yield** 5.72% 5.73% -1 70

Weighted Spread*** 434 447 -13 4

*Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market

** The change is in basis points ***Against US Treasuries (in basis points)

Lebanese Government Eurobonds

Maturity - Coupon

50/21/2013

Price*

12/22/2013

Price*

Weekly

Change%

50/21/2013

Yield

12/22/2013

Yield

Weekly

Change bps

2014, Apr - 7.375% 101.16 101.20 -0.03% 4.05% 4.13% -8

2014, May - 9.000% 101.97 102.06 -0.10% 4.07% 4.07% 0

2015, Jan - 5.875% 101.43 101.42 0.01% 4.54% 4.57% -3

2015, Aug - 8.500% 106.26 106.25 0.01% 4.55% 4.60% -5

2016, Jan - 8.500% 107.60 107.48 0.12% 4.69% 4.78% -9

2016, May - 11.625% 114.99 115.36 -0.32% 5.00% 4.90% 10

2017, Mar - 9.000% 111.24 111.35 -0.10% 5.23% 5.22% 2

2018, Jun - 5.150% 99.25 99.41 -0.16% 5.34% 5.30% 4

2020, Mar - 6.375% 101.40 101.15 0.25% 6.10% 6.15% -5

2021, Apr - 8.250% 111.27 111.28 0.00% 6.31% 6.31% 0

2022, Oct - 6.100% 97.16 97.06 0.11% 6.53% 6.54% -2

2023, Jan - 6.00% 96.02 96.07 -0.06% 6.59% 6.58% 1

2024, Dec - 7.000% 102.06 101.98 0.08% 6.73% 6.74% -1

2026, Nov - 6.600% 98.25 98.21 0.04% 6.80% 6.81% 0

2027, Nov - 6.75% 98.45 98.29 0.17% 6.92% 6.94% -2

*Bloomberg Data

The Lebanese Eurobonds market extended its timid upward trend this week with the BLOM Bond Index (BBI) inching up by 0.02% to

105.48 points, pushing its year to date negative performance down to 3.28%. Furthermore, the BBI outperformed the JP Morgan emerging

markets’ bond index that slipped by 0.70% to 619.83 points. The BBI’s progress is mainly attributed to an increasing demand for short

term maturities as the 5Y and 10Y yields on the Lebanese Eurobonds increased by weekly 4 basis points (bps) and 1 bp to 5.34% and

6.59%, respectively.

In the U.S, expectations of the Fed starting the tapering of its financial stimulus were on the rise on positive job data. Accordingly, the

economy’s credibility improved pushing investors away of safe assets market in favor of stock markets. 5Y and 10Y Treasury yields rose

by 13 bps and 14 bps to 1.49% and 2.88%, respectively. 5Y and 10Y spreads between the Lebanese Eurobonds and U.S benchmarks

narrowed by 9 bps and 13 bps to stand at 385 bps and 371 bps, respectively.

Lebanon’s credit default swap for 5 years (CDS) was last trading at 392-418 bps, slightly lower than last week’s quote of 395-425 bps. The

5Y spread between the Lebanese Eurobonds and their U.S benchmark stood lower than the 5Y Lebanese CDS as the decline in U.S

Treasuries was tracked by a minor drop in 5Y Lebanese Eurobonds performance narrowing the spread between the two instruments. In

regional markets, Saudi Arabia and Dubai CDS quotes widened by an average of 2 bps and 17 bps to 59-65 bps and 227-237 bps,

respectively. As for emerging economies, insurance premiums against state-debt default in Brazil tightened to 202-205 bps from its

previous weekly quote of 203-207 bps, while Turkey’s 5Y CDS broadened to 212-214 bps from last week’s quote of 206-210 bps.

4.50%

5.00%

5.50%

6.00%

6.50%

Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13

Weighted Effective Yield of Eurobonds



S A L

ECONOMIC AND FINANCIAL NEWS

IMF Indicators For Lebanon

Indicators 2013P 2014P

Real GDP (Annual Growth) 1.5% 1.5%

Current Account Balance (% of GDP) -16.7% -16.7%

Overall Fiscal Balance -10.4% -11%

Inflation (Annual Growth) 6.3% 3.1%

Source: Regional Economic Outlook, November 2013

BDL’s Foreign Assets

Up to November (In $B)

Source: Banque Du Liban

IMF Lowers Lebanon’s Real GDP Growth Projection to

1.5% in 2013

In its latest Regional Economic Outlook report (REO), the IMF

released revised economic indicators for both oil-importing and oil-

exporting countries in light of the challenges faced by each category.

The macroeconomic framework of oil importing countries will continue

to suffer from the violent political transitions which are depleting

foreign reserves and widening current account balances. As for

Lebanon, the real GDP growth projection has been revised down from a

previous 2% to 1.5% in 2013, below the MENA’s 2.1%, the oil

importers’ 2.8% and the 2.9% for Arab countries in Transition

(excluding Libya). The influx of Syrian refugees is expected to pressure

Lebanon’s fiscal position with the fiscal deficit representing 10.4% of

GDP in 2013 and 11% in 2014, the second-highest ratios amongst oil

importers after Egypt. Disruptions to trade routes are expected to

subdue the growth in exports while higher demand from the Syrian

refugees is likely to inflate imports. Exports of goods and services are

estimated to increase by 1.52% from $26.3B in 2013 to $26.7B in 2014

while imports of goods and services will rise by 3.04% from $36.1B in

2013 to $37.2B in 2014. Meanwhile, oil exporting countries are set to

maintain their strong economic performance but they face several

challenges over the medium term. The vulnerability of government

budgets to falling oil prices is likely to increase with the share of the

fiscal surplus in GDP falling from 4.2% in 2013 to 3% in 2014.

External buffers are also declining with the share of the current account

surplus in GDP slipping from 13.9% in 2013 to 12.4% in 2014. As for

job creation, structural reforms aiming at encouraging private sector

employment for nationals need to be implemented.

BDL’s Total Assets Slip by 0.7% to $78.29B up to

November

According to the Central Bank’s (BDL) balance sheet, total assets slid

by a monthly 0.7% to reach $78.29B by end-November, mainly on

account of the lower value of gold reserves. The latter declined by a

monthly 6.2% to $11.50B while other foreign assets shed a marginal

0.4% to $35.49B. The value of gold reserves is following the

downward trend of the metal’s international prices, especially as signs

of a slow but steady economic recovery in the US are in favor of the

dollar. Meanwhile, loans to the local financial sector rose by 3%

month-on-month to $2.19B and the securities portfolio remained

unmoved at $12.03B. On the liabilities side, currency outside BDL and

financial sector deposits declined by 1.2% and 0.6% to $2.55B and

$56.81B, respectively. As for public sector deposits, they rose by 7.6%

to $7.61B.

27.21 30.81

32.31 35.68 35.49

2009 2010 2011 2012 2013



S A L

Index Summary

Date PMI New

Orders Output Employment

Delivery times

Stocks of Purchases

Sep-13 47 43 45 50.5 48.9 51.3

Oct-13 49.1 47.2 48.3 50.1 49.7 53

Nov-13 45.1 40.3 41.6 50.2 49.6 50.2

Source: markit, Blominvest Bank

Corruption by Region

MENA

Eastern Europe &

Central Asia

Sub-Saharan

Africa Americas

% countries with below 50 scores 84 95 90 66

Top UAE Turkey Botswana Canada

Bottom Sudan Uzbekistan Somalia Haiti

Source: Transparency International

BLOM Lebanon Purchasing Managers’ Index (PMI)

Declines to 45.1 in November

BLOM Lebanon PMI (Purchasing Managers’ Index) posted below the

50-mark separating economic expansion from contraction, registering

45.1 in November compared to 49.1 in October and 47.0 in September.

This marked contraction was worsened by the twin-bombings that took

place during November. The rate of contraction picked up to the

quickest in three months, driven by sharp declines in output, new

orders and by the fall of new export orders. The PMI which is based on

a monthly survey of business conditions in the Lebanese private sector

is calculated as a weighted average of five individual sub-components:

New Orders (30%), Output (25%), Employment (20%), Suppliers’

Delivery Times (15%) and Stocks of Purchases (10%). In detail, new

orders placed at Lebanese private sector companies and the output of

these companies slid further down in November due to the ongoing

political and economic instability. Moreover, client demand from

foreign markets eased in November with 10% of the panelists

indicating a drop in new export business. The employment index

registered close to the neutral 50.0 threshold, with respondents

indicating unchanged workforce numbers. As for the volume of

outstanding business at private sector companies, it fell for the sixth

consecutive month in November, albeit at the slowest pace in the

current sequence. Despite a slight increase in input costs, the output

prices index fell from 49.8 in October to 48.2 in November as increased

market competition compelled companies to reduce their prices.

Lebanon Ranks 127th on the Corruption Perception Index

2013

Lebanon was ranked 127th among 177 countries on the Corruption

Perception Index (CPI). Lebanon’s score of 28 was surpassed by that of

Qatar, Bahrain, Saudi Arabia, Jordan and Egypt, equaled that of Russia

and was higher than that of Syria and Yemen. The CPI measures the

perceived levels of public sector corruption in 177 countries

worldwide, scoring them from 0 (highly corrupt) to 100 (very clean).

More than two-thirds of the selected countries scored less than 50 and

no country registered a perfect score, results which truly undermine the

economic efficiency of governments around the world. The lowest

levels of corruption were registered in Denmark, New Zealand and

Finland with respective scores of 91, 91 and 89 while the most

corrupted countries with a score of 8 each were Afghanistan, North

Korea and Somalia. In the MENA region, 84% of the countries scored

below 50, the UAE were the least corrupt and Sudan was at the bottom

of the regional ranking.



S A L

CCI Levels

Source: ARA Marketing Research and Consultancy

FDI Inflows and Outflows (In $B)

Source: Institute of International Finance

Consumer Confidence Index (CCI) falls to 51 points in

November

According to ARA Marketing Research and Consultancy, the

Consumer Confidence Index (CCI) tumbled by a monthly 20 points to

reach an all-time low of 51 points in November. This drop was

aggravated by the twin suicide-bombings that occurred during the

month as shown by the 43 points fall in the Security Situation Index to

47 points. The only sub-index to have avoided a downturn is the

Current Economic Situation Index which stood at 86 points in

November compared to 77 points in October. However the sub-

component still didn’t fully recover from the 22 points slip it registered

back in October. In fact, consumer confidence remains precarious with

the Current and Expected Personal Income sub-indices losing 23 points

and 30 points to settle at 56 points and 40 points in November,

respectively. Consumers’ future outlook also seems bleak due to the

ongoing political deadlock and repeated security incidents with the

Expected Economic Situation Index slipping by 1 point to 45 points

and with the Purchase of Durable Goods Index plunging by 26 points

to 120 points.

BDL Gathers Data on Foreign Direct Investment (FDI)

Lebanon’s Central Bank (BDL) recently issued a circular urging banks,

resident financial institutions and all financial intermediation

institutions starting 2014 to fill the Coordinated Direct Investment

Survey-CDIS at the end of each year, by no later than the 31st of July.

The aim of the survey, coordinated by the International Monetary Fund,

is to compile foreign direct investment in Lebanon, that is, data on

direct investments made in Lebanon by non-residents and those made

by residents outside of Lebanon. Tracking the growth in FDI flows is

primordial for measuring their impact on the Lebanese economy. This

endeavor is in line with the IMF’s recommendations for Lebanon in

terms of improving the balance of payments and international

investment statistics.

79

65 66

89

68

51

68

51

72 71

51

4.8 4.3

3.5

1.1 1.1 0.487 0.745

0.65

2009 2010 2011 2012

FDI Inflows FDI Outflows



S A L

CORPORATE DEVELOPMENTS

Bank Audi (S.A.E) Financial Highlights (In $B)

Sept 2013 Dec 2012 change

Customer's deposits 2.70 2.32 17%

Net Loans & advances to

customers 1.42 1.34 6%

Total assets 3.09 2.70 14%

Total Shareholders’

Equity ($M) 301.17 265.74 13%

Net Profit ($M) 42.32 25.69(*) 65%

(*): Value of September 2012

ODEABANK Financial Highlights

Sept 2013 Dec 2012 change

Customer's deposits 5.07 1.26 3.81

Net Loans & advances to

customers 4.29 0.87 3.42

Total assets 6.72 1.82 4.9

Total Shareholders’

Equity ($M) 473.18 256.91 216.27

Net Loss ($M) -54.63 - -

Source: Company Data

Bank Audi S.A.E’s Profit Rose to $42.32M up to

September

Bank Audi S.A.E, the bank’s Egyptian subsidiary, recorded a profit of

$42.32M up to September, a 65% year-on-year (y-o-y) increase. In

detail, net interest income and net income from fees and commissions

increased by 15% and 9% to reach $75.89M and $16.91M, respectively.

As for total assets, they increased by 14% y-t-d to $3.09B as loans and

facilities to customers rose by 6% to $1.42B. On the liabilities side,

customers’ deposits and total shareholders’ equity registered y-t-d

upturns of 17% and 13% to $2.70B and $301.17M, respectively.

ODEABANK Posts a Loss of $54.63M up to September

Due to heavy operating expenses linked to a still nascent expansion in

Turkey, ODEABANK, Bank Audi’s Turkish subsidiary posted a loss of

$54.63M as of September’s end. As for total assets, they rose from

$1.82B in December 2012 to $6.72B up to September especially since

loans and facilities to customers increased over the same period from

$865.84M to $4.29B. On the liabilities side, customers’ deposits and

total shareholders’ equity surged from $1.26B and $256.91M in

December 2012 to $5.07B and $473.18M up to September 2013.



S A L

41.87%

15.23%

27.64%

8.95% 3.30%

1.61% 0.85% 0.54%

Claims Composition

Medical Life Motor Fire Workmen Other Cargo Public Liability

FOCUS IN BRIEF

Lebanon's Insurance Sector Struggles amid Sluggish Economy

Premiums and Claims Compositions in H1 2013

Source: ACAL

As one of the most resilient economic sectors in Lebanon, insurance industry kept on defeating the regional and domestic developments

that mounted in 2013. In details, the geopolitical uprisings of the war in Syria, the Euro zone recession's spillovers as well as the local

political stalemate amid an absence of a new Cabinet formation hindered the steady growth of the insurance sector in Lebanon but couldn’t

cease it. Even though several economic sectors were hit by the rocky domestic market, both insurance and banking sectors succeeded to

show a satisfactory performance since the beginning of the year.

Lebanon ranked 48th globally and 2nd in the MENA region in terms of insurance penetration rate, according to the latest report published by

Swiss Re, a leading global reinsurer. Lebanon’s insurance sector was closely behind Morocco which stood at the 47th place and ahead of

Jordan (54th) and UAE (58th), Saudi Arabia (80th), Egypt (81th), Syria and Iraq.

Lebanon’s 2012 market penetration rate was estimated by Swiss Re at 2.85% of the Gross Domestic Product (GDP) standing below 2011's

figure of 2.9%. Yet, the sector's contribution in 2012 to the country’s economic growth (represented by the penetration rate) remained

relatively bigger than the 2.8% recorded in 2010. In more details, 2012 insurance penetration rate for non-life business was 2.02%, while

life segment grasped the remaining 0.83%.

Lebanon is also well positioned in terms of insurance density that reached $301.9 in 2012 relative to $289.8 in 2011. Accordingly, an

average of $301.9 was spent on insurance by each resident this year, revealing an improving population’s consciousness of the primordial

need of insurance protection that used to be extensively considered as a secondary necessity. Moreover, Lebanon’s insurance density

ranked 5th among the MENA countries and captured the 51st place globally, behind Kuwait (ranked 48th globally) and ahead of Oman

(ranked 54th globally).

Insurance market in Lebanon is characterized by its small size and the presence of several players. The sector counts over 50 companies

with several international and regional businesses. On a comparative scale, the market size of the Lebanese insurance sector remains

relatively small compared to other regional countries, as it accounted for 5.3% of the MENA region in 2012, versus 29.5% for the UAE

and 19.9% for Saudi Arabia.

The Lebanese insurance sector benefits from a high degree of competitiveness. AROPE Insurance sources explained that several

companies were adopting aggressive pricing strategies; while others are betting on their excellence in Customer Service, better interest

rates for investment plans and loyalty programs. In addition, several insurance companies are bank-owned which is allowing them to

benefit from an additional advantage as branches are supplementary Point of Sales (POS) handling a wide geographic scope.

Bancassurance products allowed customers to simplify the management of their financial needs on one hand, and fastened the companies’

ability to promote their products and boost their insurance premiums on the other hand.

32.56%

27.18%

21.90%

7.44%

3.02% 4.06%

2.39%

1.45%

Premiums Composition



S A L

118,771

150,333

185,383 200,852

2010 2011 2012 2013

Several barriers to growth still exist and need to be eliminated. First, the presence of several players isn’t always profitable to the market

given its small size and the fact that the majority of adherent companies found no barriers to entry given the low capital requirement of

$1.5M. Therefore, the sector is suffering from an unclear regulatory frame with several laws held at the legislative level reducing the

industry’s effectiveness. Second, several challenges pushed numerous insurance companies to hedge their risk portfolio via the reinsurance

scheme. This explains the proliferation of brokers and intermediaries in Lebanon that amounted to 1,626 companies by the end of 2011

according to the Insurance Control Commission annual report.

As for the top five non-life insurers, MEDGULF maintained its leading position and topped the list in 2012 with approximately $100M

non-life premiums and was tracked by AXA M.E. in the second place with $84M. BANKERS came third with total non-life premiums of

$83.7M, while LIBANO SUISSE and AROPE ranked fourth and fifth with respective $72M and $55M.

Although the regional tensions had their impact on Lebanon, the insurance sector continued to register a decent growth, yet a decelerating

one. Total premiums rose by an annualized 7.4% in the first half of 2013 compared to a 17.2% and 9.4% growth rates recorded in the first

half 2011 and 2012, respectively. In fact, premiums reached $739.02M by End June compared to $688.29M in 2012. This value is almost

at half Business Monitor International’s (BMI) forecast of $1.41B worth of premiums at end of December 2013. BMI’s forecast may not

be reached if the second half’s developments burdened the sector’s performance. In addition, BMI expected a 9% increase in total life

premiums to attain $411M by the end of 2013, while we are still at 8.3% at mid-year.

On the claims level, total indemnities paid to beneficiaries reached $333.32M according to ACAL, jumping by 12.5% in H1 2013

compared to the same period in 2012.

Cultural Resistance, Social and financial factors keep on weighing over life insurance progress in Lebanon. Worth noting that life

insurance isn’t a legal requirement and has no current benefits which gives the priority to other insurance segments in Lebanon such as

motor and medical insurance. When comparing to other countries, the aforementioned division remains scarcely exploited with its market

share standing at 27.2% by June 2013, and at 29.1% as at end December 2012. Luxembourg, Ireland and Hong Kong were the leading

countries in terms of life insurance share of total premiums in 2012, grasping respective stakes of 88.7%, 83.8% and 88.6%.

Yet, the growing awareness for savings’ importance and future protection increased the number of licensed companies under Lebanese

Law to carry-out life insurance operations to 34 establishments. Life insurance stake during the first six months of 2013 was relatively

higher than 2012’s stake of 26.9%. According to ACAL statistics, total premiums for life insurance increased by 8.3% y-o-y to reach

$200.85M as at June end, with 84.6% of contracted agreements relating to life protection but contributing to 42.1% only of total value.

This rise is partially attributed for life insurance standing as a major condition for banks to grant loans especially housing loans.

Meanwhile, 57.9% of total life premiums came from savings’ insurance on a lower number of contracts. Total paid claims in life insurance

amounted to $50.77M by June 2013, slipping by 6.2% y-o-y compared to last year’s similar period.

Total Non-Life Premiums by June Total Life Premiums by June ((In $, 1/1000)

(In $, 1/1000) (In $, 1/1000)

Source: ACAL

417,738

478,661 502,910

538,169

2010 2011 2012 2013



S A L

The non-life insurance businesses showed a 7.0% yearly improvement during the first 6 months of 2013, representing 72.8% of total

premiums compared to 73.1% in 2012, with medical insurance and motor insurance leading divisions. Total non-life premiums stood at

$538.17M by June 2013, while non-life claims jumped 16.6% y-o-y to reach $242.28M.

Medical insurance, which accounts for 44.7% of the non-life sector and 32.6% of the total sector, witnessed growths in both premiums and

claims following the increasing hospitalization fees. Accordingly, premiums reached $240.64M million by June, rising by an annual 11%,

resulting of respective 11.0% and 7.0% yearly increases in premiums of medical and expatriates’ accounts. The progress of this division

was supported by the low portion of population that benefits from the National Social Security Fund (NSSF) scheme. The medical

insurance took up 41.9% of total claims by June 2012 reaching $139.55M and growing by 13.0% on higher medical costs.

Motor insurance in Lebanon barely moved in the first six months of 2013, recording a 1% increase to $161.85M. The growth in the

mentioned line of business was mainly attributable to the rise in motor non-compulsory premiums (accounting for 85.0% of total motor

premiums) by 3% y-o-y to $137.712M that offset the 11% yearly decline in the compulsory segment to $24.14M. As for claims, total paid

claims up to June 2012 rose 4% to $92.13M contributing to 27.6% of total claims in the sector, the second highest contribution after

medical insurance.

The motor section was hardly hit by the Syrian influx to Lebanon as many Syrian cars were uninsured despite the Syria, Jordan and

Lebanon arrangement to oblige motorists to buy liability insurance policy in order to cross borders. In addition, the orange card insurance

scheme between most of Arab Countries only “covers damages to third parties caused by accidents occurred from insured vehicles

according to the compulsory insurance laws of each participating country.” As a market leader in Motor non-compulsory insurance,

AROPE Insurance explained that premiums haven’t increased following the Syrian influx to the country as no new laws were implemented

to cover the material damages; only bodily injuries are concerned. On the claims side, AROPE declared that Syrian refugees aren’t insured

in Lebanon forcing companies to pay additional claims without being able to recover them.

Net investment income to the insurance sector edged 2.0% up to reach $54.17M up to the 2nd quarter of 2013. Around 72.4% generated by

net income from life related investments growing by 6% to $39.24 million. Net income from non-life investments has generally seen a

drop especially in the most heavy-weighted divisions, with net income from investment in medical and motor recording each a double digit

yearly decline of 10% to $4.45M and $5.77M, respectively.

Regarding Takaful scheme, the Islamic alternative to insurance that complies with Sharia rules, it is still timidly present on the Lebanese

insurance market with only one company operating in the field. The system is underexploited due to the lack of public awareness, a shy

demand, as well as the shortage in well-trained specialists.

To sum up, Lebanon’s insurance sector kept on posting profits and maintained its strong position despite the continuous domestic and

regional uprisings, yet at a slower pace. The industry’s overall development could show better results in the future after the implementation

of several reforms. Public awareness of the sector’s importance should be enhanced, strengthening the existing underdeveloped divisions,

reinforcing the actual regulatory system as well as investing in many new lines of business like political risk or unemployment insurances.

The Lebanon Brief

Page 14 of 14

Your Investment Reference

S A L

Research Department:

Riwa Daou [email protected]

Mirna Chami [email protected]

Marwan Mikhael [email protected]

mailto:[email protected]

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