The shareholders of Islamic insurance companies Dar Al Takaful and National Takaful Company (Watania) on Tuesday voted in favour of a merger that will create the UAE’s largest takaful provider by market share.
It will involve a share swap by which shareholders of Watania will receive shares in DAT, which will be the entity that will continue to be listed on the DFM, the two companies said.
Under the terms of the merger, Watania shareholders will receive 0.734375 DAT shares for every Watania share they own, valuing the merged company at Dh2.6 billion ($707 million).
“The proposed merger will bring new energy and dynamism into the UAE’s fragmented takaful market,” Matar Al Ameri, chairman of DAT, said.
“The transaction will enable DAT to expand not only within the UAE, but potentially across the region. The merger will also support the UAE’s expanding role as a global leader in Islamic finance.”
The UAE insurance market is expected to grow at a compound annual rate of 4.1 per cent of between 2021 and 2026, Alpen Capital said in a report in February.
There was greater consolidation of the insurance market across the GCC last year through mergers and acquisitions because companies were “compelled to renew their focus on building resilience and rethinking their risk management strategies”, the report said.
The focus is likely to be on value-creating opportunities, with larger players targeting small to midsized players as well as tech-enabled operators and aggregators, Alpen Capital said.
This will not only strengthen the competitive capabilities of players in the market, but also encourage the creation of products and services in the sector to address weakening profitability, it said.
Abu Dhabi-listed Watania acquired a 4.9 per cent stake in DAT in May 2020 for Dh5.88m. The move was aimed at generating investment income by way of capital appreciation and dividends, the company said at the time.
The same year, Dubai-listed DAT bought competitor Noor Takaful for Dh215m in cash, acquiring its Noor Takaful General and Noor Takaful Family units.
All DAT and Watania policies will be held by two DAT subsidiaries: Noor Takaful Family and Noor Takaful General, with DAT being the holding company that owns the two entities, the insurance companies said.
“This strategic transaction will allow DAT to leverage its scale as a takaful champion to further develop innovative insurance offerings, meeting the ever-changing needs of the market and the public’s requirements for flexible and imaginative takaful solutions,” Ali Aldhaheri, chairman of Watania, said.
Following shareholders’ approval, creditors have a 30-day objection period and policyholders have a 45-day notice period, the statement said.
The companies have obtained preliminary regulatory approvals and the merger will be subject to final approvals from the Central Bank of the UAE, Insurance Authority and Securities and Commodities Authority.
The proposed chairman of DAT after the completion of the merger will be Mr Aldhaheri, while Mr Al Ameri will be the vice chairman. Gautam Datta will remain the chief executive of DAT, the statement said.
The merger is “expected to unlock value for all stakeholders as a result of considerable cost and revenue synergies, and on the back of optimised sales channels, reduced operating expenses and enhanced IT platforms”, the companies said.
The merged organisation will be strongly positioned to expand its product offerings and geographical footprint, while offering competitive terms to policyholders, along with improved customer service, they said.
The new entity will have a larger underwriting capacity to negotiate improved terms with reinsurers, the statement said.