Salama board proposes capital cut by 60%, to use SAR 5 mln statutory reserve to offset losses

Logo of Salama Cooperative Insurance Co.

Salama Cooperative Insurance Co.’s board of directors recommended, on March 16, a capital reduction by 60% to SAR 100 million from SAR 250 million, the insurer said in a bourse filing.

The capital restructuring is in line with Article 150 of the new Companies Law to cover the accumulated losses resulting mainly from higher claims incurred, other technical reserves, other underwriting expenses, as well as general and administrative expenses.

There is no impact of capital reduction on the company's financial obligations.

The capital and share recommendation is subject to the approval of the related official authorities, including the Saudi Central Bank (SAMA), Capital Market Authority (CMA) and EGM. 

The insurer will make announcements after appointing the financial advisor and submitting the capital reduction request to the CMA, the statement noted. 

Additionally, the board recommended using SAR 5 million from the statutory reserve, which represents the entire value of the statutory reserve as of Dec. 31, 2021, to cover part of the company’s accumulated losses. The decision will be submitted to the EGM for approval after obtaining statutory approvals from the relevant regulatory authorities.

Salama will announce any material developments on a timely basis, the statement said.