SAMA calls for more M&A deals in insurance sector

RIYADH: The Saudi Central Bank (SAMA) has issued a statement encouraging companies in the insurance sector to consider merger and acquisition (M&A) deals.

SAMA stressed the sector’s importance to the Saudi economy, and the part it plays in the government’s Financial Sector Development Program.

SAMA cited the merger of Walaa Cooperative Insurance and Metlife AIG ANB Cooperative Insurance, and of Gulf Union National Cooperative Insurance and Al-Ahlia Insurance, as successful examples of such deals and how they helped boost the financial solvency of the companies involved by improving the insurers’ capital.

Research shows that M&As can make the sector more competitive and strengthen its financial position.

Through the M&As, SAMA said it aims to improve customer service and efficiency, and reduce costs.

Last year proved to be “eventful” for M&As in the Middle East and North Africa, in particular the Kingdom, said Bader Alamoudi, senior country officer for JP Morgan Saudi Arabia.

He told Argaam in December that M&A activity was driven by companies looking to streamline costs and boost efficiency and optimization, particularly during periods of prolonged uncertainty.

“As in previous years, the financial sector has been one of the most active in terms of M&A activity in the region during 2020,” he said.

“The consolidation theme has created a ripple effect on other sectors, including energy, real estate etc., where we have started to witness heightened activity. I believe such activity will continue next year as well.”

Also notable were the stimulus packages provided by SAMA, which proved to be an immense source of cash flow that helped ease the payment burden on firms.

Alamoudi told Argaam that he expected the improvement in oil prices to rekindle retail confidence and fuel investment banking activities. “2021 is going to be a very interesting year with lots happening across all lines of business,” he said.