Saudi ins. sector faces M&A pressure, says Moody’s

Saudi Arabia’s insurance sector is likely to see consolidation as primary insurers report weaker profitability in the first half amid intense competition, Moody's Investors Service said a recent report.

“The profitability squeeze will hinder organic capital generation and thus pressure capitalization,” said Mohammed Ali Londe, AVP analyst at Moody's.

“The sector also faces a likely increase in capital requirements that small to medium-sized insurers may struggle to meet from their own resources. We therefore expect more pressure for Saudi insurers to consolidate and/or go into runoff,” he added.

However, insurers' average return on capital in the first half of 2019 was 2.4 percent compared to 4.6 percent in 2018 and 8.4 percent in 2017.

Moody's said it expects flat to modest premium growth over the coming year, reflecting “sluggish” economic growth.

Source: Argaam