Axa to sell its insurance operations in the Gulf to Kuwait-based group

French insurance giant Axa will sell its insurance operations in the Gulf region to Kuwait's Gulf Insurance Group, the company said in a statement on Monday. The transaction includes the company's stake in Axa Gulf, Axa Cooperative Insurance Company and Axa Green Crescent Insurance Company.

The deal is subject to the receipt of regulatory approvals and expected to close by the third quarter of 2021, Axa said in the statement. The value of the transaction is $269 million, according to Bloomberg.

“This new and promising chapter in our story of 70 years in the region will create more value as we become one of the largest players in the GCC,” Paul Adamson, chief executive of Axa Gulf, said. Axa Green Crescent Insurance Company said in a statement to the Abu Dhabi Securities Exchange, where its shares trade, that it was notified by shareholder Axa Mediterranean Holding that the group had decided to divest its insurance operations in the Gulf region.

“Axa Med has entered into a share purchase agreement with Gulf Insurance Group dated November 29 to sell its insurance operations in the Gulf region, which includes the sale of its 28.05 per cent shareholding in Axa GCIC,” the statement said. As part of the overall transaction, Gig will also acquire Axa Group’s entire shareholding interests in Axa Cooperative Insurance Company in Saudi Arabia and 100 per cent of the share capital of Axa Gulf in Bahrain. Upon completion of the transaction, Gig will own 28.05 per cent of the shareholding of Axa GCIC, the statement said.

Gig is the largest insurance group in Kuwait and listed on Boursa Kuwait. It is 43.6 per cent owned by Canada's Fairfax Financial Holdings and operates as a joint venture with Kuwait Projects Company Holdings, or Kipco. It has operations across the Middle East in Kuwait, Jordan, Bahrain, Egypt, Syria, Iraq, Lebanon, Saudi Arabia, Algeria, Turkey and the UAE.

Axa focuses primarily on health and property insurance. It has more than 1,000 employees, 1 million customers through more than 30 branches in Saudi Arabia, the UAE, Bahrain, Oman and Qatar. As part of the transaction, Yusuf Bin Ahmed Kanoo, one of the largest conglomerates in the Gulf, will also sell its shareholdings in Axa Gulf and Axa Cooperative Insurance Company.

“There are synergies and complementarity in our respective footprints and a clear ambition to become the largest regional player in the GCC,” said Khaled Saoud Al Hasan, group chief executive of Gig. Axa Global announced in January 2020 that it was considering a potential sale of its Middle East, central and eastern Europe businesses as part of a global strategic review, investment bank EFG Hermes said in a note on Monday.

“Selling price is at a significant discount to current share price. We see this discount as a reflection of the challenging outlook for Axa Saudi Arabia, given unceasing pressure on its core segment motor leasing and the combined economic impact of Covid-19 and low oil price on the sector,” EFG Hermes said in the note. Gig has a long history in Saudi Arabia's insurance market, where it owns a 28.5 per cent stake in Buruj, EFG Hermes added.

“We believe the presence of Axa Global since inception has shaped Axa Saudi Arabia’s underwriting and management standards as it had to comply with the group’s reserving, pricing, risk and claim management standards. This sale would mean swapping a global insurer, such as Axa Global as a key shareholder, for a regional one such as Gig,” EFG Hermes said.

With consolidation under way in banking and other financial services industries, the UAE’s insurance sector is also ripe for mergers, according to analysts. The acceleration of the country's digital transformation amid Covid-19 is placing renewed importance on scale among insurers, whose profits are under pressure because of the pandemic.

The UAE Insurance Authority’s new regulations on life and family takaful insurance, which were implemented on October 16, are also expected to result in industry consolidation. “Axa selling its insurance operations in the Gulf is big news for the industry but is by no means bad news,” Vijay Valecha, chief investment officer at Century Financial, said.

“Axa had earlier this year also sold its operations in Poland and the Czech Republic. This move from Axa is consolidation and not the beginning of the exit of insurance companies,” Mr Valecha added.

Source: The national news