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Seven Saudi insurers to raise $94.5 mln from IPOs

The IPOs, which close on May 28, have all been priced at 10 riyals per share. All the firms will sell existing shares.

*Sanad for Cooperative Insurance is offering a 40 percent stake, or 8 million shares.

*Gulf Union Cooperative Insurance Co. is offering a 40 percent stake, or 8.8 million shares.

*Saudi Arabian Cooperative Insurance, Saudi Indian Cooperative Insurance, Al-Ahlia Insurance and Allied Cooperative Insurance Group will sell 4 million shares each, or 40 percent stakes.

*Al Ahli Takaful will offer a 26.45 percent stake, or 2.65 million shares.

Analysts expect the seven IPOs to be oversubscribed because of the strong growth potential in the insurance industry, the appetite for new share issues and the relatively cheap listing price.

“The large Saudi stock market can easily absorb these small IPOs as we have seen with previous insurance IPOs,” said Ibrahin Alwan, deputy chief executive of KSB Capital Group.

The Saudi government has given licences to 26 insurance firms and is considering applications by 10 others to try to open up the insurance sector in the world’s top oil exporter.

Saudi Arabia is the largest economy in the Gulf Arab region, one of the world’s most under-insured areas, partly due to the belief that insurance indicates a lack of religious faith. Standard & Poor’s estimated last year that per capita premiums in the Gulf were around 2 percent of those in Europe.

Governments are trying to develop the insurance industry as they expand financial services to diversify economies away from energy exports.

The Saudi government has passed new laws making health and vehicle insurance compulsory. That coupled with the growth of takaful, a sharia compliant form of insurance that operates along the lines of mutual funds, is driving growth in the industry.

Revenues in the Saudi insurance sector are expected to triple from their 2005 levels to 15 billion riyals in five years, Sultan bin Mohammed bin Saud, chairman of Arabian Shield Insurance Co. has said. His company floated a 40 percent stake in March in an IPO that was 3.5 times oversubscribed.

“Growth potential is strong enough for all of the players licensed by the central bank,” Alwan said.

Seven Saudi insurers firms have already sold shares to the public and two have begun trading.

Malath Insurance Co.’s 8020.SE shares are trading 290 percent above the price of the January IPO which was almost four times oversubscribed.

Shares of Mediterranean & Gulf Insurance and Reinsurance 8030.SE (MedGulf) are 217.5 percent above the price of the IPO that was nearly three times oversubscribed in February.