Saudi insurance sector eyes more mergers and acquisitions

Saudi insurance sector eyes more mergers and acquisitions
Analysts said the Saudi insurance market is set to witness consolidation with mergers and acquisitions (M&A) gaining pace during 2021. (Social media)
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Updated 17 April 2021

Saudi insurance sector eyes more mergers and acquisitions

Saudi insurance sector eyes more mergers and acquisitions
  • Government assistance shielded sector from the coronavirus disease (COVID-19) pandemic’s impact

RIYADH: The Kingdom’s insurance sector closed the financial year 2020 on a high note with the aggregate net profit of local insurance firms, except for the Saudi Indian Company for Cooperative Insurance, rising to SR1.443 billion ($0.38 billion) in Q4, an increase of 47 percent year-on-year, according to data compiled by the financial news service Argaam.

There were 13 insurers recording higher profits in 2020, led by the Mediterranean and Gulf Insurance and Reinsurance Co., which surged 1,081 percent, the Saudi Arabian Cooperative Insurance Co., which increased 545 percent, and the Gulf General Cooperative Insurance Co. which saw net income up 397 percent.

The sector finished out the tough year on a high note mainly thanks to government support. 

KPMG said while the pandemic triggered disruption for most industries, the Saudi government intervened and provided relief by opting to pay for the treatment of all COVID-19 patients. 

The audit, tax and advisory services firm found that the cumulative net profit after zakat and tax touched a high of SR1.32 billion in the first nine months of 2020, an increase of 96.1 percent year-on-year. Argaam’s figures also found that the total gross written premiums (GWPs) of Saudi-listed insurance companies increased by 3 percent year-on-year to SR38.28 billion in 2020. 

There were 18 insurance firms out of 29 reporting an increase in GWPs last year, led by Aljazira Takaful Taawuni Co., which was up 80 percent year-on-year. 

Saudi insurers reported SR23.5 billion in net claims last year, down from SR24.7 billion a year previously. Net incurred claims accounted for around 76 percent of GWPs in 2020, the data showed.

Analysts said the Saudi insurance market was set to witness consolidation with mergers and acquisitions (M&A) gaining pace during 2021.  The Saudi Central Bank (SAMA) in January reiterated the need for insurance companies to look at M&A deals since the sector was a key driver of the Kingdom’s economy and a pillar of the Financial Sector Development Program, one of 12 executive programs launched by the Council of Economic and Development Affairs to achieve the objectives of Saudi Vision 2030.

HIGHLIGHTS

• The Kingdom’s insurance sector closed the financial year 2020 on a high note with the aggregate net profit of local insurance firms, except for the Saudi Indian Company for Cooperative Insurance, rising to SR1.443 billion($0.38 billion) in Q4.

• The total gross written premiums (GWPs) of Saudi-listed insurance companies increased by 3 percent year-on-year to SR38.28 billion in 2020.

• Saudi insurers reported SR23.5 billion in net claims last year, down from SR24.7 billion a year previously.

The recent mergers between insurance firms were positive indications that the central bank’s plans for the sector were moving in the right direction, said SAMA Gov. Fahad Al-Mubarak during the honoring of Aljazira Takaful Taawuni Co. and Solidarity Saudi Takaful Co. following their merger.

SAMA will continue to encourage insurance companies to look at potential mergers in order to achieve the goals set out as part of the Vision 2030 programs, Al-Mubarak said. 

The sector recently witnessed a number of agreements and mergers, including between Walaa Cooperative Insurance Co. and Metlife AIG ANB Cooperative Insurance Co., and between Al-Ahlia Insurance and Gulf Union National.

Talal Bahafi is chief market officer at Marsh Saudi Arabia, which is part of the global financial services group Marsh & McLennan. He said the Kingdom’s insurance sector was likely to see more consolidation in 2021, driven by insurers looking to streamline costs, boost efficiency and increase optimization.

“The last 12 months have brought about significant changes to the insurance market in the GCC (Gulf Cooperation Council), in terms of capacity and pricing,” Bahafi told Arab News. “We expect these conditions to persist throughout 2021 and for organizations to continue to face more challenging trading conditions. It is important for organizations to adapt to these shifts by renewing their focus on building resiliency and rethinking their risk management strategies. This will, in turn, ensure they have an insurance program in place which matches the risk appetite of their business.” The Clyde & Co Insurance Growth Report 2021 said the Middle East insurance sector would see increased M&A activity this year.

According to the law firm’s report, M&A insurance deals in the Middle East and Africa rose by 166.7 percent in 2020, the biggest growth across all regions.

S&P Global Ratings, in its latest report on the GCC insurance sector, said it expected to see growth in Saudi Arabia due to regulatory initiatives. 

In the GCC it expected its ratings on insurers to remain broadly stable in 2021 owing to robust capital buffers, despite ongoing economic uncertainty relating to the pandemic.

Meanwhile, the rate of Saudization in the insurance sector has reached 75 percent compared to 35 to 40 percent in the past, according to Abdullah Al-Tuwaijri, SAMA’s director general of insurance supervision.

Al-Tuwaijri, who made the remarks during a session of the Economic Growth Forum, added that the high Saudization rate indicated the sector was capable of creating more job opportunities for citizens.


Saudi Arabia to help Sudan cut IMF debt

Saudi Arabia to help Sudan cut IMF debt
Updated 18 May 2021

Saudi Arabia to help Sudan cut IMF debt

Saudi Arabia to help Sudan cut IMF debt
  • The Kingdom announced during the Paris Conference on Monday a $20 million grant to cover part of Sudan’s financing gap with the IMF

RIYADH: Saudi Arabia aims to support Sudan’s efforts to reduce its International Monetary Fund debts.
The Kingdom announced during the Paris Conference on Monday a $20 million grant to cover part of Sudan’s financing gap with the IMF, Al Arabiya reported.
Saudi Arabia also said it would also help the country deal with its arrears.
A Saudi official involved in debt restructuring talks for Sudan said that the Kingdom would encourage creditors to reach a broad agreement to reduce the African country’s $50 billion debt pile.
International Monetary Fund figures show that Saudi Arabia is the third largest creditor to Sudan, with about $4.6 billion outstanding.
Sudan is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative.
The two-day Paris Conference to support Sudan comes as France writes off billions of dollars in Sudan debt.
“Reducing Sudan’s debt, which we are about to embark on, is a first result of reforms. This trend should be cemented, both economically and politically,” the French President said at the opening of the conference.
One of the goals of the Paris conference is to garner interest in investment in the country.
Billions of dollars in projects in energy, mining, infrastructure and agriculture will be proposed, said Sudan’s minister of cabinet affairs Khalid Omar Youssef.
“Sudan is a very rich country. We do not want charity, we want investments,” said Sudanese Prime Minister Abdullah Hamdok.


Bahrain probes $1.3bn Iranian money laundering network

Bahrain probes $1.3bn Iranian money laundering network
Updated 18 May 2021

Bahrain probes $1.3bn Iranian money laundering network

Bahrain probes $1.3bn Iranian money laundering network
  • Attorney General Ali bin Fadl Al-Buainain said the alleged offenses took place between 2008 and 2012

RIYADH: Bahrain’s attorney general said that public prosecutors had uncovered a $1.3 billion money laundering racket linked to officials at Future Bank and other Iranian institutions — including its central bank.
Attorney General Ali bin Fadl Al-Buainain said the alleged offenses took place between 2008 and 2012.
Al-Buainain said that Future Bank officials, together with other Iranian bank officials and the Central Bank of Iran, were involved in the transfer of money through an unauthorized remittance system, Al Arabiya reported.
Officials concealed the source of the funds to enable banks that included Iran’s Melli Bank and Bank Saderat Iran, to complete transfers which would have otherwise been blocked.
Al-Buainain alleged that Future Bank and its controlling shareholders were involved in systematic and widespread violations of banking laws in Bahrain.

 


Oil firm OQ to develop Oman green fuels project with consortium

Oil firm OQ to develop Oman green fuels project with consortium
Updated 18 May 2021

Oil firm OQ to develop Oman green fuels project with consortium

Oil firm OQ to develop Oman green fuels project with consortium
  • At full capacity the project will consist of 25 gigawatts of renewable solar and wind energy to produce the hydrogen

A consortium including Oman’s state-owned oil firm OQ will develop a renewable energy project in the Gulf state capable of producing millions of tonnes of zero-carbon green hydrogen per year, the developers said on Tuesday.

At full capacity the project will consist of 25 gigawatts of renewable solar and wind energy to produce the hydrogen.

So-called green hydrogen, created by splitting water into its two components using electricity from renewable energy sources, is increasingly viewed as a fuel of the future to reduce carbon emissions from fossil fuels.

Other members of the consortium are Hong Kong-headquartered InterContinental Energy, a renewable energy project developer, and EnerTech, a clean energy investor and developer which is owned by the Kuwait Investment Authority.

“The project will help transform Oman’s skills base and technical expertise in renewable energy, providing a significant number of high value jobs during site construction and operation,” the statement said.

Gulf oil-producing countries are trying to diversify their economies by creating new sectors and revenues, including through a big push in renewable energy.

Abu Dhabi plans to produce and export hydrogen as fuel and Saudi Arabia is working on a $5 billion hydrogen project in the NEOM high-tech business zone.


The electric Lamborghini is coming . . . but not just yet

The electric Lamborghini is coming . . . but not just yet
Updated 18 May 2021

The electric Lamborghini is coming . . . but not just yet

The electric Lamborghini is coming . . . but not just yet
  • First hybrid series production car to hit the market in 2023, with all its models “electrified” by the end of 2024

MILAN: Italian sports car maker Lamborghini on Tuesday unveiled Tuesday a €1.5-billion ($1.8 billion) electrification plan for its luxury vehicles, joining a global push away from fossil fuels at the risk of upsetting fans.
The company, which is owned by Volkswagen subsidiary Audi, said its first hybrid series production car would hit the market in 2023, with all its models “electrified” by the end of 2024.
But a battery-only model won’t be released until the second half of the decade, Lamborghini said.
The plan is “necessary in a context of a radically-changing world,” CEO Stephan Winkelmann said in a statement.
“We want to make our contribution by continuing to reduce environmental impact,” he added, saying the investment plowed into electrification is the company’s largest-ever.
By 2025, the company should reduce carbon emissions by half, it said.
The global trend toward electrification has been more challenging for the makers of the fastest sports cars than for mass-market producers.
Some have speculated that the brands’ fans may reject the different torque and driving experience of an electric vehicle compared to traditional combustion engines.
Following in Ferrari’s footsteps, Lamborghini in 2019 unveiled its first foray into electrification with the Sian supercar, capable of accelerating from 0 to 62mph (110 km/h) in less than 2.8 seconds.
The Sian, which means “lightning” in Bolognese dialect, cost over €3 million and only about 60 were built.
Lamborghini’s well-heeled customers helped it to record profit in 2020 despite the coronavirus-related challenges that hurt the automobile industry as a whole.
The company sold 7,430 cars last year, compared to its record of 8,205 vehicles in 2019.
Lamborghini shut down production for 70 days last year at the height of the coronavirus crisis in Italy.


Dubai desert tour outfit to expand in Saudi Arabia

Dubai desert tour outfit to expand in Saudi Arabia
Updated 18 May 2021

Dubai desert tour outfit to expand in Saudi Arabia

Dubai desert tour outfit to expand in Saudi Arabia
  • The joint venture, signed at the Arabian Travel Market, will establish a full-service destination management company in Saudi Arabia

DUBAI: Saudi family conglomerate Aljan and Brothers Holding Group is bringing Dubai’s Desert Adventures Tourism to the Kingdom, as international tourism is expected to boom.
The joint venture, signed at the Arabian Travel Market, will establish a full-service destination management company in Saudi Arabia, modeled on the Desert Adventures Tourism operation in the UAE.
“Despite the challenges of the past eighteen months we have seen considerable growth in visitation and spend across many regions of the country and we are optimistic about the future of tourism in Saudi,” Fahd Hamidaddin, CEO of the Saudi Tourism Authority, said.
Aljan and Brothers is one of the largest private sector conglomerates in the Middle East, with businesses in textiles, real estate, logistics, and entertainment.
“Through this partnership, we will not only become a market leader in this sector but also create new jobs and support elevating the Kingdom as a prime tourism destination,” the group’s sponsor of tourism and hospitality Fahad bin saad Alajlan said.