JEDDAH, 8 May 2007 -- Mediterranean & Gulf Insurance and Reinsurance Company (MedGulf) began trading on the Saudi stock market, opened in a separate session beginning at 10 yesterday morning. MedGulf is the third of thirteen insurance companies approved by the Capital Market Authority (CMA) for the launch of their initial public offerings (IPOs) this year.

MedGulf shares jumped 167.50 percent on the first day of trading after opening at SR42 before reaching its high of SR44.75 and as low as SR26.50 before closing at SR26.75. MedGulf's IPO was oversubscribed four times as nearly 1.5 million Saudi investors took part in the purchasing of the 20 million shares worth SR200 million made public by the company. National Commercial Bank (NCB) was named lead underwriters of the IPO. BMG Financial Group together with Saudi Investment Bank have performed the financial advisory and arranging role for MedGulf being the largest IPO offering in the Saudi insurance sector thus far.

Basil Al-Ghalayini, CEO of BMG Financial Group, said "The high trading level of MedGulf during the first day of listing reflects the strong appetite of investors in the insurance sector in general as well as investors' confidence in the management of MedGulf." He added: "We as BMG Financial Group, expect an active trading pattern for MedGulf's driven by its leading position in the Saudi market. Hence, analysts and fund managers will be following its share price movement closely in the future."

MedGulf was established in 1980 in Lebanon before expanding its services to the Gulf region. Its expansion was credited mainly to the pool of resources by leading investment groups and major players in the financial and insurance sectors such as Saudi Oger Ltd., Al Azizia Commercial Investment Company, Saudi investment Bank and LFZ Holding.

Commenting on the performance of MedGulf upon its first trading day, Hesham Abo-Jamee, head of asset management at Bakheet Financial Advisors in Riyadh said, "Based on its size I think MedGulf has settled to a good price in the mid to upper twenties. Many investors thought it would perform similarly to Malath Cooperative Insurance and Reinsurance, which went on the Tadawul on Saturday, but that didn't happen due to its larger size and increased number of shares made public."

Other Saudi insurance companies announced by the CMA to launch IPOs in the months to come are SABB Takaful which is to offer 3.5 million shares or 35 percent of it market capital worth SR100 million, Saudi United Cooperative Insurance and Arabian Shield are both to offer 8 million shares accounting for 40 percent of their company's capital valued at SR200 million and Saudi IAIC floating four million shares or 40 percent of its capital of SR100 million. The names of the banks appointed to handle IPOs are yet to be announced.

The 13 insurance companies combined will possess a capital worth of SR2.62 billion and be responsible for publicly floating as many as SR936.44 million shares for subscription. The current value placed on the Saudi insurance market has been estimated to stand at approximately SR8 billion with expectations of market growth leaping to SR18 billion in the next five years.

The Tadawul All-Share Index (TASI) fell again yesterday. The index closed 6.63 points lower at 7,313.19. Over SR11.90 billion worth of shares changed hands yesterday.

Abo-Jamee went on to say that the overall Saudi market index should remain stable in the 7,000 to 7,500 range slowly increasing in the months to come. He added that the expectations of an index increase will be based primarily on the second and third quarter company profits but said that the outlook looked good to take the TASI to 9,000 by year's end.

Shares of the National Company for Cooperative Insurance (NCCI) rose slightly to SR103, while shares of Malath dropped 9.38 percent to SR36.25 yesterday.

By Khalil Hanware & Sarah Abdullah

© Arab News 2007