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Tue 12 Jan 2010 09:00 PM

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Insurer Malath sees M&A pick up in Saudi sector

Insurance companies are seeking to expand and tap into country's 25m population.

Saudi insurer Malath Cooperative Insurance and Reinsurance Co sees mergers in the sector as new arrivals attempt to capitalise on the kingdom's growth market, its chief executive said.

Aly al Ayed also said Malath plans to quadruple the number of its branches in the kingdom by the end of 2010.

He said: "We will open in 2010 nine more (branches) in the kingdom which will total 12 ... the first three branches are expected to be completed by midyear."

Established in 2007 with a capital of $80 million, Malath provides insurance in aviation, energy, engineering, marine cargo and hull, as well as health insurance.

More insurers are seeking licences in Saudi Arabia to tap the country's 25 million population.

Last year, the government made it mandatory for non Saudi private sector employees to obtain health insurance and a similar requirement is expected for Saudi citizens in the next few years.

Ayed expects to see some mergers and acquisitions in the insurance sector in the coming years as many of the firms are still not fully licensed to operate in the country and others may struggle with limited capital, around $26.6 million.

He said: "We will see a lot of acquisition, probably not in 2010 but maybe the year after."

Ayed added: "Insurance companies have to be well capitalised. These companies cannot survive due to the constraint on their paid up capital ... so their option is to increase their paid up capital or merge with someone else to create a sustainable financial instituon."

He declined to give a profit forecast. Malath posted a net profit of $266,652 in the third quarter, compared with a net loss of $2.07 million in the prior-year period.

Malath's shares ended unchanged at 26.10 riyals on Tuesday.

The all share benchmark fell 0.4 percent to 6,266 points. (Reuters)

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