Saudi Insurance Sector Poised for Consolidation with Potential Merger
In a move set to reshape the Saudi insurance landscape, two major firms, Buruj Cooperative Insurance Co. and Mediterranean and Gulf Insurance and Reinsurance Co. (MedGulf), have signed a non-binding memorandum of understanding to explore a potential merger.
The memorandum aims to pave the way for a strategic transaction through a share exchange offer, as revealed in a filing with Tadawul, the Saudi stock exchange.
With the goal of increasing MedGulf’s capital, the deal will also involve issuing new shares to Buruj shareholders based on an exchange ratio to be mutually agreed upon.
Vision 2030 Driving Insurance Sector Growth
The merger comes amidst the Saudi government’s efforts to bolster the insurance sector as part of its Vision 2030 plan, aimed at diversifying the economy and enhancing financial stability.
According to projections by UK-based consultancy firm Global Data, Saudi Arabia’s insurance industry is expected to grow at a compound annual rate of 5.2 percent until 2028, reaching a total of SR83.7 billion ($22.3 billion).
The growth is largely fueled by the health and motor segments, which are forecasted to contribute 86 percent of the overall gross written premiums.
Details of the Proposed Merger
If the merger proposal moves forward, MedGulf will serve as the acquiring company, with Buruj being the acquired entity, as stated in the Tadawul announcement.
While MedGulf has appointed HSBC Saudi Arabia as its financial adviser and Khoshaim & Associates as its legal advisor, Buruj will soon announce its own financial adviser for the transaction.
The merger process will involve in-depth financial, tax, legal, and actuarial reviews by both companies, as they work towards finalizing the terms of the merger.
Buruj has assured that its business operations will continue as usual until the merger is completed, with any significant updates to be disclosed in accordance with regulations.