LONDON, 7 June 2007 — Prudential plc of Britain, one of the world’s leading insurance companies, yesterday signed here a Memorandum of Understanding (MOU) with Saudi Arabia’s Bank Aljazira to set up a new Takaful company in the Kingdom.
The company is actually a spin-off of Bank Aljazira’s Takaful Ta’awuni life insurance business. The Saudi Arabian Monetary Agency (SAMA) last year gave approval to Bank Aljazira to start negotiations that resulted in the deal.
Under the agreement, Prudential will take a significant stake and become the largest individual shareholder in the new venture that will acquire the assets and business of Takaful Ta’awuni, whose life Takaful products were the first to be regulated by SAMA.
The new venture will later be listed on Tadawul, Saudi Arabia’s Stock Exchange. Bank Aljazira will also be a large shareholder in the venture. In addition, Prudential has agreed to take a stake in Bank Aljazira’s new funds management business.
The announcement was made yesterday through the London Stock Exchange and Tadawul.
Dawood Taylor, assistant general manager and head of Takaful Ta’awuni, said the joint venture will “distribute Takaful Ta’awuni products both in Saudi Arabia and eventually throughout the Middle East and North Africa. It is hoped, with (final) regulatory approval, we could finalize the joint venture company by the end of this year”.
“We will determine its name based on a market survey currently being undertaken by Prudential, which has operations worldwide. The joint venture will be headquartered in Jeddah and there is also an international agreement for cross-border regional offices at a later stage. The joint venture must have a minimum SR100 million in capital, but it is likely that it would be nearer SR300 million. We have excellent relations with SAMA which has been extremely cooperative in implementing regulated Takaful products in the Kingdom,” Taylor noted.
Taylor and his colleagues have been in talks with Prudential for the last three years. Takaful Ta’awuni’s business, Taylor told Arab News recently, has increased dramatically over the last two years, with the division now breaking even.
Takaful Ta’awuni now has a staff of 400 and SR4 billion in life coverage policies, comprising 15,000 individuals and 22,000 group life Takaful clients. In addition, Takaful Ta’awuni has over 91 percent Saudi employees.
The bank plans to open several Takaful offices — for both men and women — in Riyadh, Dammam, Makkah, Madinah and Hofuf. The Saudi Arabian insurance market has an estimated 800 million British pound (SR6 billion) in annual gross premiums and with more than 70 percent of this being related to motor, medical and property insurance.
With GDP per capita now exceeding 6,700 British pound (SR50,000) and life insurance penetration of less than one percent, there is significant room for growth.
Barry Stowe, chief executive of Prudential Corporation Asia, said the company has “a terrific track record of working very well with leading local players to create world class operations and I look forward to another success here in Saudi Arabia with Bank Aljariza.”
Mishari Al-Mishari, chief executive officer of Bank Aljazira, said “the insurance market in Saudi Arabia is really set to take off.”