The board of directors of UAE-based Islamic Arab Insurance Company (Salama) has adopted a resolution to reduce the issued share capital of the company by AED475,710,293 ($129.5m), according to a statement lodged with the Dubai Financial Market on 11 September.
The resolution also states that, following the reduction of capital, the company would issue mandatory convertible sukuk for an amount of up to AED175m.
Salama will hold a general shareholders’ meeting to approve the board’s decision on capital restructuring after obtaining the necessary regulatory approval from the Central Bank of the United Arab Emirates and the Securities and Commodities Authority.
Reasons for accumulated losses
Salama, in its interim financial statements, showed accumulated losses of AED440.7m as of 30 June 2025. Equity attributable to the owners of the company stood at AED298.0m while the issued capital was AED939.6m at mid-year.
In a statement released on 8 August 2025 through the DFM, Salama explained that the accumulated losses are due to:
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Provision of AED288.5m made in 2024 against qualified assets linked to litigation ongoing since 2019. Salama will continue to pursue the legal cases.
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Provision of AED28.02m made in 2023 against the irrecoverable reinsurance share related to a large fire claim.
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The devaluation of the Egyptian pound in 2023 against the UAE dirham, coupled with prevailing inflation rates in Egypt, necessitated a goodwill impairment of AED49m from subsidiaries, primarily in Egypt.
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The company's 2023 profits were impacted by unrealised losses on shareholders’ investments amounting to AED71.2m, as well as a provision of AED12.01m for credit losses on other investments and receivables, in accordance with IFRS 9.
Salama reported a net profit after tax attributable to shareholders of AED13.1m for 2024, turning around from net losses of AED1158.4m for 2023. For 1H2025, the company posted a net profit after tax of AED5.7m.
Addressing accumulated losses
In the August statement, Salama said that the board aims to conclusively address the accumulated losses in the second half of this year. Action is being taken to analyse the optimal method to reduce accumulated losses and to evaluate the regulatory requirements and regulatory approvals that are needed. Other measures being taken by the company include asset reallocation and enhanced risk management to strengthen financial stability, improve liquidity, and ensure sustainable long-term growth.
Salama has appointed an external financial advisor to review the regulatory requirements and make recommendations to the management and the board on the optimal method of dealing with accumulated losses during 2025. The work of the financial advisor is underway and is expected to be presented to the board in the third quarter of 2025.
In addition, starting in early 2024, actions have been taken to reallocate assets (55% complete) and enhance risk management (90% complete), the August statement said.