Insurance stocks provide haven in Dubai equities

DUBAI: Insurance stocks traded here are proving a haven in an unforgiving market as investors increase their bets on mergers and acquisitions (M&As) in the industry after recent reforms.

Just six of the 37 members of the emirate’s benchmark equities index have gained this year, and four of those are insurers.

They have all advanced by at least 4.9 per cent, while the DFM General Index has slumped 18 per cent, under pressure from weak real-estate developers.

The prospects of M&As are increasing after Dubai gave the industry a boost by making health insurance mandatory among foreign employees, including their dependents and domestic workers, under changes that started in 2014. Foreigners make up more than 80 per cent of the population in the United Arab Emirates (UAE), last measured at 9.1 million in 2016.

Closely held investment firm Abu Dhabi Financial Group LLC (ADFG) and its Goldilocks fund last month acquired a stake of almost 30 per cent in Islamic Arab Insurance Co, known as Salama. It is the best-performing stock on Dubai’s main index this year, up 30 per cent.

The transaction is reflective of an industry that is experiencing “a positive transformation”, ADFG said.

The DFM Financial Insurance Index is alone among the Dubai market’s nine sector gauges in generating a positive performance this year.

The UAE had 35 local insurance companies and 27 foreign ones at the end of last year.

Insurers racked up their fastest growth in written premiums in three years at 12 per cent last year.