Arabia Insurance Cooperative Company (AIC) and United Cooperative Assurance Company (UCA) have announced that they are considering a potential merger.
The announcements were made in separate statements lodged by the insurers on the Saudi Exchange.
Both sides signed a non-binding Memorandum of Understanding (MoU) on 19 June to evaluate the potential deal. Both companies will conduct technical, financial, tax, legal, and actuarial due diligence and engage in non-binding discussions on the terms and conditions of the proposed transaction.
Under the MoU, AIC will be the merging company and UCA the merged company, through a share exchange offer. AIC will increase its capital and issue new shares to UCA shareholders based on a swap ratio to be agreed between the parties.
The implementation of the proposed transaction is subject to the two companies sealing a final binding agreement that determines the terms and conditions of the transaction. The terms and conditions of the final binding agreement will include obtaining all the required regulatory approvals and the approval of the extraordinary general assembly of each company on the proposed merger.
Some details of the financial results of AIC and UCA for the year 2024
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All figures are in SAR’000
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AIC
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UCA
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Insurance Revenues
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694,691
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1,049,578
|
|
Insurance Services Result
|
206,542
|
266,442
|
|
Insurance Results
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36,664
|
21,471
|
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Investment net Profit (Loss)
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37,830
|
14,563
|
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Net Insurance Financing Expenses
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-6,081
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-2,508
|
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Net Profit (Loss), After Zakat,
Attributable To Shareholders
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30,148
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-15,055
|
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Total Comprehensive Income
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45,022
|
3,159
|
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Total Shareholders Equity @ 31 December 2024
(after deducting minority equity)
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604,938
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268,314
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Source: Financial data posted on Tadawul
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Market consolidation
On 9 June, Fitch Ratings published a commentary saying that Saudi Arabia’s insurance market consolidation will accelerate over the next two years, driven by new regulatory capital requirements and weak underwriting profitability on intense price competition.
Fitch said, “Some smaller insurers may struggle to meet the requirements or remain profitable, and may merge with or be acquired by larger insurers as a result. At least three potential mergers are currently under evaluation: Liva and Malath, Salama and Saudi Enaya, and MedGulf and Buruj. The merger of Arabian Shield and Alinma Tokio Marine Company in November 2023 was the most recent M&A transaction completed.”
The global credit rating agency said that the Saudi Arabian insurance market is dominated by a few large insurers, particularly Tawuniya and Bupa Arabia, which had a combined market share of 52% in 2024, measured by gross written premiums.