Medgulf Buys Buruj Coop Insurance for $155.84 Million

Marking a significant consolidation move in Saudi Arabia’s insurance sector, Buruj Cooperative Insurance has agreed to merge with the Mediterranean and Gulf Insurance and Reinsurance (Medgulf) in all-share transaction.

Medgulf will issue 33.16 million new shares to Buruj shareholders, implying an exchange ratio of around 1.11 Medgulf shares for every Buruj share held. The transaction values Buruj at $155.84 million. With this merger, Medgulf will raise its capital by 31.58% to $370 million, with its total number of shares increasing fromm105 million to 138.16 million.

The implied valuation putting Buruj at $5.2 per share represents a 2.66% premium to Buruj’s closing share price of $5.06 on 24 July, the last trading day before the agreement was signed. The valuation was based on Medgulf’s share price of $4.7 on the same day.

The merger will create the fourth-largest ins. player in the Kingdom by gross written premiums (GWP), with a combined $1.09 billion in GWP and an estimated 5.4% market share based on 2024 data.

According to Saudi Insurance Authority, the Kingdom’s insurance sector recorded $20.26 billion in total premiums last year and the top three firms controlled 64.5% of the market, while the remaining 24 companies, including Buruj (0.5%) and Medgulf (4.9%) shared the rest.

The transaction is expected to improve the new company’s scale, profitability, and capital strength. It aims to enhance operational efficiency through cost synergies and shared services, optimise the combined insurance portfolio, especially the health and motor segments, and support new growth in digital, reinsurance, and investment offerings.

The merged entity also plans to improve its solvency margin and expand access to retail, SME, and corporate customers, according to the statement.

Buruj shares will be delisted from Tadawul once all approvals are obtained. Any fractional entitlements resulting from the share swap will be sold on-market, with proceeds distributed pro rata.

Other Merger Proposals

Global ratings agency Fitch Ratings said that the Kingdom’s insurance sector is experiencing a wave of consolidation as companies including Liva-Malath and Salama Cooperative-Saudi Enaya are holding discussions due to tightening capital regulations, shrinking margins, and mounting competition in motor and medical lines. Gulf General Cooperative Ins. was also in talks with Gulf Union Al Ahlia earlier this year before scrapping the merger proposal in March.

In the past, Gulf Union merged with Al Ahlia in 2020, Aljazira Takaful taking over Solidarity in 2021, and Arabian Shield absorbing Alahli Takaful in 2022 besides acquiring Alinma Tokio Marine in 2023.

While Fitch views the consolidation trend and regulatory push as credit-positive over the long term, smaller players are already facing rising compliance costs and earnings pressure amid limited economies of scale.

The market remains heavily concentrated, with Tawuniya and Bupa Arabia controlling 52% of total GWP as of late 2024, leaving the remaining players to either scale up or risk being squeezed out.