SALAMA Approves Capital Reduction and Sukuk Plans

Islamic Arab Insurance Company (SALAMA), a leading takaful provider based in the United Arab Emirates, has recently made significant strategic decisions aimed at enhancing its financial structure. On November 24, 2025, the company's board of directors approved resolutions concerning capital reduction and the issuance of Mandatory Convertible Sukuk (MCS), subject to regulatory approvals from the Central Bank of the UAE and the Securities & Commodities Authority (SCA).

The board's decision to proceed with a capital reduction is a strategic move to optimize the company's capital structure and enhance shareholder value. By reducing its capital, SALAMA aims to better align its capital base with its current business needs, potentially leading to more efficient operations and improved financial performance.

In addition to the capital reduction, SALAMA's board has also given an in-principle approval for the issuance of MCS. This financial instrument is particularly interesting as it combines features of both debt and equity, providing the company with flexibility in managing its capital. The issuance of MCS is contingent upon the approval of the SCA and the Central Bank, as well as a final Fatwa from the company's Shari'a advisors, ensuring compliance with Islamic financial principles.

The move towards issuing MCS could be seen as a strategic effort to raise capital in a manner that aligns with Islamic finance principles while also providing investors with a potentially attractive investment vehicle. This strategy not only supports the company's growth ambitions but also reinforces its commitment to adhering to Islamic financial regulations.

From an investment perspective, these strategic decisions by SALAMA could signal a positive outlook for the company's financial health, provided the regulatory approvals are obtained. Investors might view the capital reduction as a step towards a more efficient capital structure, while the MCS issuance could attract new investors seeking Shari'a-compliant investment opportunities.

Given these developments, potential investors should consider a 'hold' position on SALAMA. The company's strategic initiatives are promising, but the final impact will depend on the successful execution of these plans and the regulatory approvals. Monitoring the progress of these initiatives will be crucial for making informed investment decisions.