Insurers in UAE rally amid M&A speculation

UAE insurers rallied on Monday amid speculation that mergers and acquisitions may heat up in the industry following the combination of National Bank of Abu Dhabi and FGB, the two biggest banks in Abu Dhabi.

Islamic Arab Insurance jumped 15 per cent, Dubai Islamic Insurance and Reinsurance advanced 14.9 per cent and Dar Al Takaful increased 14.8 per cent in Dubai.

In Abu Dhabi, Al Khazna Insurance leapt 13.9 per cent, Al Wathba National Insurance added 13.8 per cent and Axa Green Crescent Insurance rose 12.9 per cent.

However, the indexes were mixed, with Dubai’s main gauge rising 0.2 per cent and Abu Dhabi’s key measure falling 0.3 per cent.

“Traders were led by talk insurers are subject to consolidation, which follows the banking consolidation theme following the announcement of the NBAD-FGB merger in mid-2016,” said Sanyalaksna Manibhandu, head of research at NBAD Securities. “As with banks there are probably too many insurers in the UAE, which makes consolidation a reasonable theme for trading today.”

Mergers typically make businesses more efficient by getting rid of duplicate jobs.

Many insurers have popped up in recent years and a number of them are struggling to be profitable. That has made it difficult for some to stay afloat, especially those that made risky investments in the stock market in recent years and suffered heavy losses.

There are 91 registered insurance companies in the UAE, according to the Insurance Authority. While this has been good for consumers, it has led to losses among many insurers as prices for insuring everything from cars to houses fell. Some have quit the non-life insurance business altogether in the UAE, such as Zurich Insurance, which exited in November 2015.

Analysts including those at the consultancy firm PwC are, however, upbeat about long-term growth. PwC has said the insurance market in the Middle East has significant growth pot­ential, with an average insurance take-up of just 0.3 per cent in life insurance and 1.1 per cent in non-life insurance.

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