Islamic insurance merger creates UAE giant

Al Hilal Bank CEO Alex Coelho said the lender would focus on its core business following the sale of its Islamic insurance unit. (Photo courtesy of Al Hilal)
Updated 20 December 2017
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Islamic insurance merger creates UAE giant

LONDON: Takaful Emarat has agreed to acquire Al Hilal Takaful from Al Hilal Bank in an all-cash transaction that will create the largest Islamic insurer in the UAE, based on 2016 gross written contributions.
The move is viewed as part of a consolidation drive in the Gulf’s takaful sector and the wider regional insurance market as local players look at mergers and acquisitions to offset weak profitability.
A recent report by E&Y said performance had been knocked by low interest rates, a stagnant real estate market and, until recently, insufficient regulatory oversight.
A statement said Takaful Emarat provides life and health takaful insurance for customers, mostly in Dubai and the Northern Emirates.
Al Hilal Takaful operates with a general license, offering a wide range of cover for individual and corporate customers, primarily in the emirate of Abu Dhabi.
The deal will enable the combined group to offer comprehensive takaful products and services throughout the UAE, giving consumers greater choice.
The two companies wrote more than Dh900 million ($245 million) in combined gross written contributions in 2016, said the announcement.
Mohammad Al-Hawari, managing director of Takaful Emarat, said Tuesday’s deal would drive growth through a wider range of takaful services and a larger customer base.
“In parallel, we are making strong progress in developing our digital platform, which will mean a highly efficient and cost-effective service for our customers.” Alex Coelho, CEO of Al Hilal Bank, said: “We are working closely together to ensure a smooth transition for all our insurance customers.”
Takaful Emarat’s planned acquisition of Al Hilal Takaful is subject to full regulatory approvals and is scheduled to be completed in the first quarter of 2018.
The transfer of Al Hilal Takaful’s ownership to Takaful Emarat will have no impact on current takaful policies, contracts, claims settlements or the writing of new insurance business.
E&Y’s industry report pointed out that increasingly competitive markets with price and margin pressures had seen some insurers cutting costs to maintain their bottom line.
“Despite these efforts, short-term financial results in some markets are impacted by regulatory change and the need for better reserving — leading some local insurers to actively look at consolidation.” Regulatory tightening is ongoing.
In an unprecedented move in November 2016, SAMA suspended a number of significant KSA motor insurers from issuing new motor policies until customer complaints and claims management issues were addressed by the insurers.
The E&Y report predicted that regulators and insurers would exhibit increased agility in addressing emerging opportunities such as digital and the challenge of lower oil prices.
“Regulatory changes, including the introduction of VAT/IFRS and higher customer expectations, will be key drivers of change and an opportunity for insurers to revamp their operating models,” said E&Y.


SABIC prepares to meet investors to offer bond

Updated 25 September 2018
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SABIC prepares to meet investors to offer bond

  • The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25
  • SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale

LONDON: Saudi Basic Industries Corp. (SABIC) is preparing to offer its dollar-denominated unsecured bond to the global market with investor meetings due to start this week.
The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston from Sept. 25, according to a filing on the Saudi stock exchange on Tuesday.
The Saudi company is likely to be keen to tap into the heightened international interest in the Kingdom’s financial markets following the lifting of some restrictions on foreign investors’ activities at the start of the year.
SABIC has also confirmed the appointment of BNP Paribas and Citigroup as global coordinators on the sale, alongside HSBC Bank, Mitsubishi UFG Securities EMEA and Standard Chartered Bank acting as joint lead managers, in its Tadawul note.
The proposed issuance has been well-received so far by analysts with ratings agency Moody’s Investor Service assigning an ‘A1’ rating to the proposed senior unsecured notes to be issued by the financial vehicle, referred to as SABIC Capital II, and guaranteed by SABIC itself.
“SABIC’s A1 rating reflects its strong business position in the chemical sector and its ability to weather industry volatility, particularly given its healthy operational cash flows and conservative liquidity profile,” said Rehan Akbar, a senior analyst at Moody’s, in a note on Monday.

 

The bond is anticipated to be used in part to refinance an existing SR11.3 billion ($3 billion) one-year bridge loan raised in January this year to fund the company’s 24.99 percent stake in the Swiss chemical company Clariant, according to the Moody’s note. All regulatory requirements were completed on this acquisition earlier this month.
Cash proceeds from the bond may also be used to repay a $1 billion bond due on Oct. 3, according to Moody’s.
On Tuesday SABIC confirmed that the bond will be used mainly to refinance “outstanding financial obligations” of the company and its subsidiaries.
Analysts at rating agency S&P Global were also upbeat about SABIC’s outlook, with research published on Monday stating that the company has “strong profitability” via its KSA operations and a “strong” liquidity position.
“The debt issuance is helpful for the credit profile in the sense that it extends the company’s debt maturity profile and strengthens its liquidity position,” said Tommy Trask, corporate and infrastructure credit analyst at S&P Global.
The agency currently assigns the petrochemical firm an ‘A Minus’ rating, with a “stable outlook,” which it said reflects its “view on the sovereign as well as its expectations that SABIC will maintain high profitability under current benign industry conditions.”
S&P Global’s report said margins in the global chemical industry will “largely stabilize in 2018 following several years of improvement, attributable to the increase in commodity chemical capacity.”
However, it also warned that a key risk to credit quality is
the trend for mergers and acquisitions within the sector and the “potential negative impact on credit metrics from funding them with debt.”

FACTOID

SABIC operates in more than 50 countries across the world.