• Home
• News Article

Saudi Arabia: SR200m MedGulf IPO oversubscribed 4 times

JEDDAH -- MedGulf 's IPO was oversubscribed four times as nearly 1.5 million Saudis subscribed to the insurance company's initial public offering that offered 20 million shares worth SR200 million.

According to a statement issued by the National Commercial Bank , which managed the IPO, as many as 1,413,974 investors applied for 78,559,570 shares valued at SR785.595 million.

"This outstanding result shows the strength of MedGulf and its leading position in the Saudi market. Furthermore, with over 1.5 million subscribers it is a testimony of the successful policies of Sama (Saudi Arabian Monetary Agency) and CMA (Capital Market Authority) and the leadership of Saudi Arabia to allow the maximum number of citizens to benefit from promising economic sectors in the country," said Basil M. Al Ghalayini, CEO of BMG Financial Advisors.

"The conclusion of the MedGulf IPO timed with a new rally in the stock market. So the new insurance IPOs will witness similar success in the future," he said.

MedGulf 's IPO was arranged by a consortium of BMG and Saudi Investment Bank (SAIB) while NCB acted as the flotation manager. NCB and SAIB acted as underwriters. All Saudi banks participated in receiving subscriptions.

Earlier, the CMA also announced the IPO of five more insurance companies in the Kingdom beginning on March 17 which will continue for 10 days.

Saudi United Cooperative Insurance is offering eight million shares, which accounts for 40 per cent of the company's capital worth SR200 million, while Arabian Shield Insurance Co. will offer the same number of shares accounting for 40 per cent of the total shares worth SR200 million. Saudi IAIC for Insurance offers four million shares, which is 40 per cent of the total shares worth SR100 million.

The SABB Takaful is offering 3.5 million shares, or 35 per cent of total shares worth SR100 million. The Saudi French Cooperative Insurance Co. is offering 3.1 million shares representing 31 per cent of the total capital of SR100 million.

Banks appointed by the companies, the names of which will be announced later, will operate the IPOs.

The insurance market in Saudi Arabia, which is estimated at SR8 billion, is set for a massive growth as it has been thrown open following the recent decision by the Council of Ministers to issue licence for 13 new insurance companies in the Kingdom.

According to an economic report by the NCB , the development of health insurance will result in a further SR30 billion being invested in the Saudi health sector. The report also predicted that the Kingdom's insurance market will jump from SR8 billion to SR18 billion within the next five years.

The medical insurance premiums are estimated to grow from about SR1.1 billion in 2004 to SR6.3 billion in 2008 -- a CAGR (compounded annual growth rate) of 54.8 per cent.

"The cabinet approved a request from the minister of commerce and industry to licence 13 joint stock companies for cooperative insurance," the Saudi Press Agency reported, quoting a cabinet statement.

The 13 companies will have a total capital of SR2.62 billion and they will float shares worth SR936.44 million for public subscription.

The capital of the companies ranges between SR100 million and SR800 million. One company has agreed to float 47.49 per cent of its shares; nine will float 40 per cent and the remainder between 25 and 31 per cent of shares.

The cabinet approval came more than a year after the Saudi Arabian General Investment Authority (Sagia) issued investment licences -- the first step to doing business in the Kingdom -- to 13 insurance firms.

BY HABIB SHAIKH

© Khaleej Times 2007