Amana Cooperative Insurance and Saudi Enaya Cooperative Insurance have agreed to merge.
Upon completion of the merger, Enaya’s assets and liabilities will be transferred to Amana, subject to shareholders' and government approval, the two companies said in separate bourse statements.
Enaya’s shareholders will own 55% of the merged entity’s capital and Amana’s current shareholders will own 45%.
Amana had signed last October a non-binding memorandum of understanding with Saudi Enaya Cooperative Insurance to assess the feasibility of a merger between them.
Amana's share reduction exercise
Last December, Amana Cooperative Insurance announced that its board of directors had recommended reducing the company's capital by 45.83% to write off accumulated losses.
In a statement then to the Saudi bourse, Amana said that the capital would be reduced from SAR240m ($64m) to SAR130m. The accumulated losses of the company stood at about SAR110m at 30 September 2020.
If Amana’s capital reduction is not finalised prior to the merger completion, Amana will issue 29.28m new ordinary shares at a nominal value of SAR10 each. If Amana’s capital reduction is finalised prior to the merger completion, Amana will issue 15.86m new ordinary shares.
Fierce competition among the region’s bloated insurance sector is encouraging some industry players to merge. “Ongoing high competition, a contraction in the population of about 4% across the GCC on average, and economic uncertainty will weigh on growth prospects and earnings, while elevated asset risk could lead to further volatility in the coming quarters,” S&P said in a report on the regional insurance sector in February.