Merger with UCA to improve solvency: Enaya Chairman

Amr Khashoggi, Chairman, Saudi Enaya Cooperative Insurance Co.

Saudi Enaya Cooperative Insurance Co.’s merger with United Cooperative Assurance Co. (UCA) will improve solvency and help provide integrated insurance products to customers, Chairman Amr Khashoggi told Argaam.  

The new entity aims to dominate the market share across all insurance categories and be on an equal footing with the mid-cap insurance firms in the Saudi market.  

Khashoggi also spoke of the merger synergies and the sector’s competitiveness.   

Below are the excerpts from the interview:  

Q: What is the importance of the Enaya-UCA merger? And what are the merger goals?

A: Amid the challenges facing the small companies and the sector development endeavors, the merger will likely improve solvency, add financial strength, as well as competitive advantages that will boost both companies’ growth, sustainability and add value by offering full-fledged insurance products for Enaya clientele.

Q: How do you evaluate the competitive environment in the insurance sector across the Kingdom? What are your views on the industry growth rate?

A: The Saudi insurance industry has been the largest in the MENA region since 2022. It is a large and highly competitive market.

The insurance industry’s gross written premiums (GWPs) grew at 10% in 2021 and 29% in 2022, driven primarily by medical insurance.

Net written premiums (NWPs) rose by 26%, supported by medical insurance over the first nine months of 2023. The market size reached SAR 49 billion, with medical insurance dominating the lion’s share. Growth was also spurred by auto insurance, accounting for 20% of the market, propelled by the Kingdom’s compulsory insurance decision.

Other factors that will help the sector grow over the coming years are population growth, higher employment rates among nationals and expats, boosting economic growth and Vision 2030 focusing on restructuring the healthcare industry through privatization of hospitals and introducing private health insurance programs.

The sector’s growth will also be driven by the government providing medical insurance for nationals, compulsory medical insurance for visitors, tourists, and passengers and other initiatives including medical insurance for workers, etc.

Q: What are the merger benefits for both companies?

A: The merger will result in strategic positive synergies, as it will promote growth, competitiveness, innovation and further improve the service quality, bolster the financial position, and maximize the shareholders’ rights.

Q: What is the mechanism to determine the share swap ratio? Is it a fair ratio? What about the shareholders’ feedback?

A: Enaya inked the binding merger deal, upon the advice of the financial advisor.

We agreed on the ratio, factoring in the current insurance market restructuring, higher competitiveness, the regulatory requirements to increase the minimum capital of the sector companies and talks with the UCA board of directors.

Q: Can you tell us about the new unit business plans to develop products and expand the geographic reach of your services?

A: Enaya has obviously and noticeably developed its business portfolio over the past period. Accordingly, the new entity will continue the pursuit of this development.

If the general meeting, slated for Dec. 5, approves the merger proposal, detailed plans for the new entity, which includes strategic, financial, administrative, sales, and operational activities, will be mapped out.

Q: What are your goals for GWPs, market share and profitability over the coming period?

A: The new entity seeks to capture the market share in all segments of the insurance industry to reach an equal footing with the medium-cap insurance companies in the Saudi market.

Q: Vision 2023’s Financial Sector Development Program (FSDP) encourages mergers and acquisitions (M&As) in the insurance industry. How do you evaluate this opportunity in terms of the sector’s operating and financial development?

A: The insurance industry is a key pillar of FSDP, especially as the government seeks to set up a specialized supervisory authority to address the challenges, which will help create mega entities and provide radical solutions for emerging headwinds.

Therefore, market players will be financially stronger and capable of optimally investing funds, providing competitive prices and attracting professional candidates.