Union Insurance Company will be reducing its capital by 30.50% to AED230m ($62.63m) from AED330.93m to offset accumulated losses amounting to AED142.75m, the company said in a statement lodged with the Abu Dhabi Securities Exchange.
The transaction will be executed by utilising AED41.81m from reserves, including AED21.85m from the statutory reserve and AED19.95m from the legal reserve. The remaining AED100.94m will be written off by cancelling a corresponding number of shares equal to this amount.
The capital cut will take effect before trading hours on 30 June 2025, which will also mark the first trading day following the reduction.
Shareholders approved the capital reduction at a General Assembly held on 21 April 2025.
In a detailed analysis, Union Insurance said that the accumulated losses were largely due to the following (excluding accumulated losses on restatement of financial statements on adoption of IFRS 17 and 9):
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Item
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AED
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1) Purchase of investment properties paid for but not received
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72.30m
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2) Impairment of value of purchased freehold land
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22.83m
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Bad debt provision (owing by former major shareholders since 2019 and 2020)
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26.20m
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1) The company, which was established in 1998, had provided an amount of AED72.30m during the period ended 30 June 2021 for investment properties that had been paid for but the title to which was never received. Subsequently, the company treated the amount as a prior period adjustment resulting in an increase of AED72.30m in accumulated losses on 1 January 2020.
The investment properties were real estate assets purchased from a related party during 2013 and 2014. However, the related party never fulfilled its obligation to Union Insurance. Accordingly, the insurer neither has the title dees nor possession of the said properties. The company's board of directors decided to book a full provision for the assets. The company is also pursuing legal action to recover its rights.
2) Union Insurance had recorded freehold land at a value of AED82.05m. The land was obtained in an exchange transaction on 15 July 2018. As part of the exchange, the company received the land for a fair value of AED50.21m even though the asset was recorded at a book value of AED82.05m. Subsequently, the insurer restated the cost of the land at AED59.21m, resulting in an AED22.83m reduction in the value of property and equipment and accumulated losses of the same amount as of 1 January 2020.
Union Insurance’s accumulated losses as of 31 December 2024 stood at AED142.75m.