The ADNIC head office in Abu Dhabi. The company's timing with the Saudi push could be spot on, with the Kindom's insurance sector posied for faster growth. Image Credit: Supplied

Dubai: In a landmark deal, the UAE insurance giant ADNIC is taking a 51 per cent stake in the Allianz Saudi Fransi Cooperative Insurance Company in a major push into Saudi Arabia. The value of the stake deal is SR499 million.

The Saudi insurance sector is primed for further growth, and making it a lucrative place to be for new entrants. Already, the Kingdom’s banking space has attracted UAE heavyweights, and insurance is thus seen as a natural progression.

“The transaction fits fundamentally within the core of the company’s (ADNIC) strategic pillars as it will allow it to further extend its presence into the Saudi Arabian market, deliver and optimize operating model efficiencies,” the UAE insurer said in a statement.

Putting up the SR499 million
ADNIC plans to fund the Saudi stake purchase through 'internal cash resources'.
"To the extent that any external funding may be required at the date of completion, the company has access to sufficient funding facilities from banks to meet any requirements," the statement said. "The transfer
of monies for the acquisition is to be made on completion date i.e. after receiving all the necessary regulatory approvals."

Through these 3 years, the UAE insurance sector has seen multiple deals happen, as it pushes for consolidation in a market that is loaded with opportunities - but with a fair share of challenges too. But even with all the deals happening, ADNIC's SR499 million play into Saudi Arabia would rank at the very top.

ADNIC will be buying the stake from Allianz Europe, Allianz France and Allianz MENA Holding (Bermuda) Limited. (The Allianz exit follows similar patterns of big European insurers downsizing or going out in full from their Middle East exposures. AXA was a recent one.)

The transaction is conditional on 'obtaining a number of customary regulatory waivers and consents'.

ADNIC's acquiring the 51% stake in Allianz Saudi Fransi Cooperative Insurance Co. for SR499 million is the largest insurance deal in the Middle East in recent years. It reflects the growing importance of the Saudi insurance sector, which is expected to grow to around $10.4 billion by 2026. Investors reacted positively to the acquisition news, the stock jumped nearly 3% on ADX - and trading at its highest level in over a year...

- Vijay Valecha, Chief Investment Officer at Century Financial