Shares in Islamic Arabic Insurance Company (Salama), were one of the top performers on Dubai’s stock market on Tuesday as the stock has been surging this week after an investment fund announced that it has increased its stake in the company.

Salama’s stock price added 7 percent on Tuesday, and was the second-best performer on the index (behind Dubai Investments, which jumped 11 percent), helping Dubai’s index to close 1.42 percent higher.

“The stock has been doing quite well ever since ADFG and Goldilocks increased their stakes in the firm. Seeing these known players invest in a stock is perceived as positive by investors as it signals there is hidden value to be unlocked,” Issam Kassabieh, senior financial analyst at MENACORP, told Zawya by email.

The investment fund, Goldilocks Investment Company, was launched in 2015 with a mandate to invest in listed equities and is an indirect subsidiary of Abu Dhabi Financial Group (ADFG).

Goldilocks announced earlier in the week in a press release that it has increased its stake in SALAMA from 9.92 percent to 14.05 percent. The company added that it has acquired the additional stake via a share finance facility.

“Together, Goldilocks and ADFG continue to hold around 29.92% of Salama’s issued shares,” the press release said.

The press release stated that Goldilocks and ADFG remain bullish on the growth prospects of the insurance sector in the United Arab Emirates.

Since the announcement, Salama’s stock price has added more than 12 percent and is now up 2.56 percent in 2018, outperforming Dubai’s stock market index, which has dropped 24.77 percent since the start of the year.

The insurance company posted a third quarter 2018 net loss attributable to shareholders of 672,000 UAE dirhams ($183,000), compared to a  loss of 7.2 million UAE dirhams in the third quarter of 2017.

In a report published last month, consultancy firm Badri said that the UAE's listed insurance companies reported a combined profit of 1,420 million dirhams in the first nine months of 2018, compared to a profit of 1,092 million dirhams in the same period last year and 778 million dirhams in the first nine months of 2016.

The report added that 4 out of the UAE's 30 listed insurance companies posted losses for the nine-month period this year, with losses amounting to approximately 22 million UAE dirhams. Four companies also posted losses in the same period last year, but the scale of those losses were much higher (134 million dirhams).

“As consolidation takes places in the banking sector and recently the completion of an acquisition (Al Hilal insurance) in the local insurance sector, this could signal a similar scenario for insurance, which could be positive for Salama,” MENACORP’s Kassabieh said.

National Bank of Abu Dhabi and First Gulf Bank completed a merger last year to create First Abu Dhabi Bank. Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank are currently in merger talks. (Read more here)

Takaful Emarat annonced that it would acquire Al Hilal Bank’s Islamic insurance entity, Al Hilal Takaful, at the end of the year 2017.The deal gained approval from the UAE Insurance Authority in July this year.

Elsewhere in the region, Abu Dhabi’s index ended Tuesday’s trading session 0.56 percent higher, Saudi Arabia's index closed 0.25 percent higher, Qatar’s index closed 0.7 percent lower, Bahrain’s index ended the day mainly flat, while Oman’s index dropped 0.13 percent, Kuwait’s premier market index added 0.1 percent and Egypt's blue-chip index EGX30 gained 1.51 percent.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(Gerard.aoun@refinitiv.com)

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