The Egyptian government plans to merge state insurance companies, to create one of the five biggest insurance firms in the region, and then prepare the new company for privatisation, Investment Minister Mahmoud Mohieldin said on August 16.
The companies include Misr Insurance, Chark Insurance and National Insurance, which between them control 70 percent of an industry which holds net investments of about 18.7 billion Egyptian pounds ($3.3 billion).
"The merger process will end in March 2008, giving us a giant company through which we aim to have a regional significant presence through branching out," Mohieddin told Reuters in a telephone interview.
The merger needs approval by general assembly meetings of the companies in September. The assemblies are all controlled by the government. Then there will be a six-month phase to decide details of the merger and privatisation.
Mohieldin said the government would offer a stake in the new company on the stock exchange. "This will be through an initial public offering (IPO) and not a strategic investor," he said.
Last year the government sold an 80 percent stake in Bank of Alexandria to Italy's Intesa Sanpaolo and it is offering the same size stake in Banque du Caire, another big state bank, to strategic investors in 2008.
"We chose the IPO instead of the strategic investor approach in insurance because financially we don't need an injection of capital and we already have enough Egyptian expertise," Mohieldin said.
Along with a bank restructuring and reform plan, the Egyptian government has moved in the past three years to reform the stagnant insurance sector, which accounts for only 1 percent of gross domestic product (GDP). But work on the insurance sector has been slow.
In August 2006 President Hosni Mubarak issued a decree establishing a holding company grouping the three largest state-run insurance companies as a precursor to privatisation. There are 21 companies in the Egyptian insurance sector including American and European names.
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