News Middle East30 Jun 2019

Saudi Arabia:Two more insurers studying possible merger

30 Jun 2019

Solidarity Saudi Takaful and Aljazira Takaful Taawuni have signed a non-binding MOU to evaluate a potential merger between the companies.

The announcement of a possible merger was the second in the past two weeks. On 18 June, MetLife AIG ANB Cooperative Insurance announced that it had signed a non-binding memorandum of understanding with Walaa Cooperative Insurance to evaluate a potential merger between the two companies.

Solidarity said in a bourse filing last week that the proposed merger, if successful, will be effected through a share swap that will see Aljazira issue new shares to Solidarity’s shareholders in exchange for all issued shares of Solidarity.

The two companies have initially agreed that valuation will be based on equity book value and that the swap ratio between Aljazira and the shareholders of Solidarity shall be calculated using the respective adjusted equity book value per share as at a mutually agreed cut-off date.

The MOU will expire upon the signing of the merger agreement or at the end of the first quarter of 2020, whichever is earlier.

Solidarity Saudi Takaful was established in 2009 while Aljazira Takaful Taawuni was founded the following year. Each had a market share of less than 1% last year in terms of GWP.

Mr Adel Abdulaziz Al-Essa, a spokesman for the insurance industry, said that mergers are now a necessary and strategic option especially for small and medium sized insurers. These need to form larger entities to be able to compete in the market and to meet expected increases in capital requirements which the regulators are currently considering.


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