French insurance company Axa will sell its insurance operations in the Gulf region to Kuwait’s Gulf Insurance Group, the company said on Monday.
The transaction includes the company’s stake in Axa Gulf, Axa Co-operative Insurance Company and Axa Green Crescent Insurance Company.
The deal is subject to regulatory approval and is set to be completed by the third quarter of 2021, Axa said. The value of the transaction is $269 million, according to Bloomberg.
“This new and promising chapter in our story of 70 years in the region will create more value as we become one of the largest players in the GCC,” said Paul Adamson, chief executive of Axa Gulf.
Axa Green Crescent Insurance Company said in a statement to the Abu Dhabi Securities Exchange, where its shares trade, that it was notified by shareholder Axa Mediterranean Holding that the group had decided to divest its insurance operations in the Gulf region.
“Axa Med has entered into a share purchase agreement with Gulf Insurance Group dated November 29 to sell its insurance operations in the Gulf region, which includes the sale of its 28.05 per cent shareholding in Axa GCIC,” the company said.
Gulf Insurance Group will also acquire Axa Group’s entire shareholding in Axa Co-operative Insurance Company in Saudi Arabia and Axa Gulf in Bahrain.
Upon completion of the transaction, it will own 28.05 per cent of the shareholding of Axa GCIC.
Gulf Insurance Group is the largest insurer in Kuwait and is listed on Boursa Kuwait. It is 43.6 per cent owned by Canada’s Fairfax Financial Holdings and operates as a joint venture with Kuwait Projects Company Holdings, or Kipco.
It has operations across the Middle East in Kuwait, Jordan, Bahrain, Egypt, Syria, Iraq, Lebanon, Saudi Arabia, Algeria, Turkey and the UAE.
Axa focuses primarily on health and property insurance. It has a million customers and more than 1,000 employees at more than 30 branches in Saudi Arabia, the UAE, Bahrain, Oman and Qatar.
As part of the transaction, Yusuf Bin Ahmed Kanoo, one of the largest conglomerates in the Gulf, will also sell its stake in Axa Gulf and Axa Co-operative Insurance Company.
“There are synergies and complementarity in our respective footprints and a clear ambition to become the largest regional player in the GCC,” said Khaled Al Hasan, group chief executive of Gulf Insurance Group.
Axa Global announced in January that it was considering a potential sale of its Middle Eastern, Central and Eastern European businesses as part of a global strategic review.
The “selling price is at a significant discount to [the] current share price,” EFG Hermes said in a note yesterday, regarding the sale of Axa’s business in Saudi Arabia.
“We see this discount as a reflection of the challenging outlook for Axa Saudi Arabia, given unceasing pressure on its core segment, motor leasing, and the combined economic impact of Covid-19 and low oil price on the sector.”
Gulf Insurance Group has a long history in Saudi Arabia’s insurance market, where it owns a 28.5 per cent stake in Buruj, according to EFG.
With consolidation under way in banking and other financial services industries, the UAE’s insurance sector is also ripe for mergers, analysts said.
A move to hasten the country’s digital transformation amid Covid-19 is placing renewed importance on scale among insurers, whose profits are under pressure because of the pandemic.
The UAE Insurance Authority’s new regulations on life and family takaful insurance, which were enforced in October, are also expected to encourage consolidations.
“Axa selling its insurance operations in the Gulf is big news for the industry, but [it] is by no means bad news,” said Vijay Valecha, chief investment officer at Century Financial.
“Axa had earlier this year also sold its operations in Poland and the Czech Republic. This move from Axa is consolidation and not the beginning of the exit of insurance companies.”