Undervalued Takaful Insurers and Resilient Brokers in a Volatile Middle East

In the face of geopolitical tension, fluctuating oil prices, and macroeconomic uncertainty, the Middle East's financial sector is undergoing a quiet transformation. Among the region's overlooked opportunities lie Islamic takaful insurers and financially robust brokers, which are proving resilient in turbulent markets. Islamic Arab Insurance (Salama) PJSC, AXIS Capital, and Ege Seramik exemplify this trend, offering undervalued entry points for investors seeking stability in volatility. Here's why these firms could thrive—and how to capitalize on their strengths.

Islamic Arab Insurance (Salama) PJSC: A Debt-Free Takaful Pioneer

Salama stands out as one of the Middle East's oldest Islamic insurers, specializing in takaful (Islamic insurance) products ranging from family protection to auto and travel coverage. Its debt-free balance sheet—with a debt-to-equity ratio of 0%—provides a critical buffer against liquidity risks, a rarity in an industry often burdened by leverage.

Key Strengths:
- Diversified Takaful Portfolio: Salama's product suite spans 12 countries, including high-growth markets like Algeria and Egypt. Its Q1 2025 Takaful revenue of AED256.36 million highlights sustained demand for Sharia-compliant insurance.
- Operational Turnaround: After a AED0.16 loss per share in FY 2023, Salama posted a modest profit of AED0.014 per share in FY 2024, driven by cost discipline and foreign exchange gains.

Risks to Monitor:
- Low Profit Margins: Its trailing twelve-month net profit margin of 0.20% underscores reliance on non-recurring gains (e.g., a AED19.4 million one-off gain in 2024).
- Valuation Ambiguity: A P/E ratio of 186.8x vs. a P/S ratio of 0.4x signals conflicting signals—investors should focus on revenue growth rather than earnings volatility.

AXIS Capital: Navigating Volatility with Strong Underwriting

AXIS Capital, a global specialty insurer, is a standout example of a financially resilient broker. Its Q1 2025 results reflect disciplined underwriting and capital management:
- Improved Combined Ratio: Reduced to 90.2% from 91.1% in 2024, driven by cost-saving initiatives and strong performance in its reinsurance segment (92.3% combined ratio).
- Capital Strength: Book value per share rose 16.4% year-over-year to $66.48, supported by net investment income growth (+24% YoY) and a $400 million share buyback program.

Why It Matters in a Volatile Market:
AXIS's focus on high-margin specialty lines (e.g., professional liability, marine insurance) aligns with Middle Eastern industries like energy and shipping. Its ability to manage catastrophe risks (despite a 2.2% drag from California wildfires) underscores operational resilience.

Ege Seramik: Liquidity-Driven Resilience in Construction

Turkey's Ege Seramik, a ceramics manufacturer, offers a contrast but equally compelling story. Its strong liquidity—with a current ratio of 3.1x—and diversified customer base (40% exports) shield it from domestic inflation and lira volatility.

Key Metrics:
- Debt-to-Equity Ratio: A conservative 0.3x, far below industry peers.
- Revenue Stability: Despite Turkey's economic slowdown, Ege Seramik maintained flat revenue growth in 2024, aided by price hikes and cost controls.

Investment Case:
In a region where construction is a cornerstone of economic activity, Ege Seramik's innovation in eco-friendly tiles and regional expansion (into North Africa) position it to capitalize on post-pandemic infrastructure spending.

Why These Stocks Are Overlooked—and Why That's a Buying Opportunity

1. Salama's Takaful Edge: As Islamic finance expands (projected to hit $3.4 trillion by 2030), Salama's Sharia-compliant products are underappreciated in a market fixated on conventional insurers.

2. AXIS's Strategic Capital Use: Its buybacks and focus on high-return niches make it a rare “quality” play in an insurance sector plagued by low interest rates and rising claims costs.

3. Ege Seramik's Contrarian Play: With Turkey's stock market down 15% YoY, undervalued industrials like Ege Seramik offer asymmetric upside as the economy stabilizes.

Investment Strategy: A Defensive Allocation in a Volatile Region

• Salama PJSC: Buy for diversification into Islamic finance. Target entry at below AED0.40/share, with a 6–12 month horizon to capitalize on Takaful adoption.
• AXIS Capital: Accumulate on dips below $60/share, focusing on its underwriting cycle improvement.
• Ege Seramik: Consider a long position at TRY20/share, with a focus on operational leverage as demand rebounds.

Final Thoughts

The Middle East's financial landscape is far from monolithic. While oil prices and geopolitical risks dominate headlines, companies like Salama, AXIS, and Ege Seramik are quietly building moats through Sharia-compliant products, disciplined underwriting, and fortress balance sheets. For investors willing to look past volatility, these firms represent a chance to profit from overlooked resilience in a region on the cusp of transformation.

Investors should conduct further due diligence, including risk factors and geopolitical exposures.