Moody's places MEDGULF rating under review for possible upgrade

Logo of Mediterranean and Gulf Insurance and Reinsurance Co. (MEDGULF)

Moody's placed the 'B3' insurance financial strength rating of The Mediterranean and Gulf Insurance and Reinsurance Co. (MEDGULF) under review for a possible upgrade, as outlook was previously positive.
 

The global rating agency stated that this comes after the company announced it had signed a non-binding memorandum of understanding (MoU) with Buruj Cooperative Insurance Co. It added that Buruj's 'Baa2' rating is currently under review for a possible downgrade, to evaluate a potential merger between the two companies.
 

The review for an upgrade reflects Moody's expectation that the creditworthiness of the potential entity, following the proposed merger, would be stronger compared to the current standing of MEDGULF, particularly concerning capital adequacy.
 

While the merger with Buruj, which is financially stronger, is expected to enhance MEDGULF's capital adequacy, the agency anticipates that the latter will remain weaker compared to the major Saudi insurers including Buruj.
 

Additionally, the anticipated merger would enhance MEDGULF's market position and diversify its products due to the complementary business mix of Buruj.
 

In July, MEDGULF and Buruj signed a non-binding MoU to evaluate the feasibility of a potential merger, as reported earlier by Argaam.
 

According to the MoU, MEDGULF will be the merging company through a share-swap deal. MEDGULF will raise its capital by issuing new shares to Buruj shareholders, based on the agreed swap ratio.