Islamic Arab Insurance Company to raise foreign ownership limit to 49%
The firm also plans to reduce paid up capital to write off accumulated losses
Islamic Arab Insurance Company (Salama), one of the UAE’s largest takaful companies, plans to raise the foreign ownership limit of its shares to the maximum permissible under UAE law of 49 per cent, the company said.
The Islamic insurer is also reducing paid up capital of Dh1.21 billion to write off accumulated losses of Dh394 million to allow it to start paying dividends again, according to a statement posted on Sunday on the Dubai Financial Market, where its shares trade.
“The paid-up capital of the company as well as the number of issued shares will be reduced approximately by one third, which should reflect positively on the financial structure of the company and put it on track towards starting dividend distribution,” Salama said of the decisions made at a recent board of directors meeting.
“Eeven after reduction of capital ... the company will continue to have a high and healthy solvency capital that exceeds the regulatory requirements."
The company also plans to cancel about 21.6 million treasury shares bought 10 years ago to enhance the efficiency of its capital structure.
“These measures will enable the company to improve its credit rating, which was recently upgraded by S&P to 'BBB'. The board is committed to continue to steer the company towards greater success and efficiency, that reflects positively on the company's customers and shareholders,” it said.
The resolutions are subject to approval by regulators, after which they will be voted on at a shareholders' meeting.
In a report earlier this year, Moody’s Investors Service said global demand for Islamic insurance, also know as takaful, is growing, helping premiums to rise and supporting profitability.
"We expect premiums to keep growing moderately in the next two to three years, and the industry will benefit from improved regulation," Mohammed Ali Londe, assistant vice president and an analyst in Moody's financial institutions group said at the time. "Takaful insurers' profitability should stabilise in 2018 and 2019 after falling in 2017 due to discounting in Gulf Cooperation Council countries and rising claims in South East Asia."
Globally, gross takaful premiums, or contributions, increased at a compound annual rate of 9 per cent between 2014 and 2017. In the GCC region, South East Asia and Africa, demand will continue to be bolstered by the widening of compulsory cover in products such as motor, travel and health, Moody’s said.
The GCC will also benefit from activity linked to events such as the Dubai Expo 2020 and 2022 Fifa World Cup, it added.
Updated: October 13, 2019 05:06 PM