Merger talks begin among Saudi-listed insurers

Saudi-listed insurers Liva and Malath Cooperative Insurance have signed a non-binding agreement to study a potential merger, as consolidation in the sector continues to ramp up across the Gulf.

The share-swap ratio will be finalised after concluding all necessary due diligence by the two companies.

The companies will have to obtain the approvals of the Insurance Authority, the Capital Market Authority, the Saudi Exchange and the General Authority for Competition. In addition, they will need approvals from their respective general assemblies.

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The memorandum of understanding will terminate after 12 months or at the date of the execution of a merger agreement, whichever comes earlier.

Liva KSA is majority owned by Liva Insurance, a subsidiary of Oman-based Liva Group.

The Tadawul-listed insurer reported a 470 percent year-on-year increase in net profit to SAR11.3 million ($3 million) in the first half of 2024. The bottom-line more than doubled to SAR6.6 million in the second quarter. Gross written premium totalled SAR522 million last year.

However, the profits of Malath Insurance fell 78 percent year on year to SAR11.6 million in the first half of 2024. The second-quarter earnings plunged 98 percent year on year to SAR151,000.

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This month analysts said that more consolidations were likely among small and medium-sized Islamic insurers in the UAE and Saudi Arabia as they continue to struggle with weak earnings.

One in five Islamic insurers in Saudi Arabia and one in three of those in the UAE merged in recent years, in an environment of increased competition and stricter regulations on solvency capital requirements.

“While we expect overall credit conditions for Islamic insurers will remain stable over the next six to 12 months, consolidation will likely remain a hot topic among smaller and midsize players,” said Emir Mujkic, a credit analyst at S&P Global Ratings.