The Saudi Central Bank (SAMA) has issued a statement to motivate companies in the insurance sector to consider merger and acquisition (M&A) deals.
SAMA highlighted the sector’s contribution to the Saudi economy and the part it plays in the government’s Financial Sector Development Program. Several studies have shown that M&As can make the sector more competitive and leverage its financial position.
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 boost the financial solvency of the companies involved by improving the insurers’ capital.
SAMA stated that through M&As it intends to enhance customer service and efficiency and reduce costs. 2020 was an active year for M&As in the Middle East and North Africa (MENA) region, in particular, the Kingdom, said Bader Alamoudi, a senior country officer for JP Morgan Saudi Arabia.
Further, Alamoudi stated that M&A activity in the region 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. The consolidation theme has created a ripple effect on other sectors, including energy, real estate, etc., where we have started to witness heightened activity,” Alamoudi added.
The stimulus packages provided by SAMA proved to be an immense source of cash flow that helped ease the payment burden on firms. “2021 is going to be a very interesting year with lots happening across all lines of business,” Alamoudi stated.