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The Dubai Financial Market has seen a handful of insurance sector related M&A plays. Aman is providing the next set of deals. Image Credit: Gulf News Archive

Dubai: In the latest deal within UAE insurance sector, Dubai-based AMAN is selling its life insurance line to Abu Dhabi National Takaful Co., and if the all-clear is sounded by the regulator will result in a ‘lucrative’ profit for the former.

AMAN also has another potential deal in the making – selling all of its core insurance businesses to Salama. It would then see AMAN transform into an investment company after approval from the UAE Central Bank and Securities & Commodities Authority.

In a statement, AMAN said: “The company has sent the request (on the life insurance sale) application to UAE Central Bank – Insurance Sector to approve the sale and complete the procedures to finalise the transaction. More information shall be declared at a later stage.”

This year, there have been two other deals involving insurance entities, with Salama in the midst of a merger push with Takaful Emarat, while Watania and Dar Al Takaful completed their merger early July. (There was also NLGIC, part of Oman’s Ominvest group, acquiring RSA's regional operations.)

For long, many in the local insurance sector had been talking about the need to have fewer players, given the relative size of the UAE market. It finally seems to have resonated with the players, leading to these increased activity on the consolidation side.

When it comes to their stock market presence, most listed insurers have seen limited activity with their prices through the years.

Many reasons for insurer consolidation
"Post pandemic, insurers in the region shifted their focus to understanding the new competitive operating environment and altering their way of doing business to be more resilient. These priorities include themes such as consolidation, digitalization, re-engineering operating models, cost optimization, capital efficiency, new revenue streams and business models built around alliances and partnerships.

As a result, we are seeing a growing trend of M&A within insurance industry. The more prominent players are targeting small- to mid-sized insurers, especially tech-enabled operators, to build on their strength, cost-efficiency and capabilities.

The M&A activity in the region is also driven by consumers' demand for customized, innovative and convenient solutions, compelling insurance firms either develop in-house capabilities or acquire insurtech companies that can deliver improved customer experience.

The UAE insurance market is expected to grow at a CAGR of 4.1% by 2026 - insurance companies are engaging in M&A to maintain their competitive position and be the first choice among their target consumers."

- Vijay Valecha, Chief Investment Officer at Century Financial