Islamic Finance

Saudi insurers Shariah-compliant Walaa, MetLife AIG ANB agree merger deal

Saudi firm Walaa Cooperative Insurance has signed a binding merger deal to acquire all stakes held by shareholders of MetLife AIG ANB Cooperative Insurance through a share swap deal without any cash consideration.

Shariah-compliant Walaa, the bigger insurer, said in a stock exchange filing on Sunday it will make an offer to shareholders of MetLife AIG ANB and proceed with the merger.

The insurer said it will increase its capital from 528 million riyals ($140.8 million) to 646,397,060 riyals by issuing new ordinary shares to all shareholders in MetLife AIG ANB.

The ownership percentage of the shareholders in MetLife AIG ANB will be 18.32 per cent of the share capital of Walaa after the capital increase, and the ownership percentage of the current shareholders in Walaa will be reduced from 100 per cent to 81.68 per cent, said Walaa.

Aljazira Capital is Walaa’s financial advisor for the merger, and Saudi Kuwait Finance House represented MetLife AIG ANB.

Walaa and MetLife AIG ANB signed a non-binding memorandum of understanding on June 18 to evaluate a potential merger.

The Saudi Arabian Monetary Authority (SAMA) proposed stricter risk-based capital requirements for insurance firms, a move that 33 per cent of chief financial officers in the GCC surveyed by credit rating agency Moody’s expect will drive industry consolidation. This was up from 25 per cent in 2018, Moody’s said in March.

There are 33 insurance and reinsurance companies licensed to operate in Saudi Arabia, according to data from SAMA.

Gross written premiums in 2018 reached 34,920 million riyals ($9.3 billion), down from 36,597 million riyals in 2017, according to SAMA data.

($1 = 3.75 Saudi riyals)

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