Malath Saudi Arabia Plans To Quadruple Branches

JEDDAH: Saudi insurer Malath Cooperative Insurance and Reinsurance Co. sees mergers in the sector as new arrivals attempt to capitalize on the Kingdom’s growth market, its chief executive said.

Aly Al-Ayed also said Malath plans to quadruple the number of its branches in the Kingdom by the end of 2010.

“We will open in 2010 nine more (branches) in the Kingdom which will total 12 … the first three branches are expected to be completed by mid-year,” he said.

Established in 2007 with a capital of SR300 million ($80 million), Malath provides insurance in aviation, energy, engineering, marine cargo and hull, as well as health insurance.

More insurers are seeking licenses in Saudi Arabia to tap the country’s 25 million population. The Kingdom is currently considered one of the world’s least-insured areas, partly due a belief among many Muslims that obtaining insurance indicates a lack of faith.

Last year, the government made it mandatory for non-Saudi private sector employees to obtain health insurance and a similar requirement is expected for Saudi citizens in the next few years.

Ayed expects to see some mergers and acquisitions in the insurance sector in the coming years as many of the firms are still not fully licensed to operate in the country and others may struggle with limited capital, around 100 million riyals. “We will see a lot of acquisition, probably not in 2010 but maybe the year after,” he said.

“Insurance companies have to be well capitalized. These companies cannot survive due to the constraint on their paidup capital … so their option is to increase their paid up capital or merge with someone else to create a sustainable financial institution.” He declined to give a profit forecast. Malath posted a net profit of SR1 million in the third quarter, compared with a net loss of SR7.8 million in the prior-year period.

Malath’s shares ended unchanged at SR26.10 on Tuesday.