Arig announced ahead of the issue that shares would be allocated up to the value of $100 million, implying an expectation of oversubscription. Sources involved in the transaction blamed the slow summer period and the failure of the governments of Kuwait and Libya to take up the offer of additional shares. Before the deal, Kuwait's Ministry of Finance, the UAE's Ministry of Finance & Industry and the Central Bank of Libya each owned 16.5 per cent of Arig's shares, with the remainder held by private investors. The UAE government will now become the largest single shareholder.

'The slight undersubscription will not affect our expansion plans,' says Arig chief executive Udo Krueger. 'When we were assigned our [BBB] rating by Standard & Poor'sin June, it stated that we were very well capitalised. We were aiming to demonstrate shareholders' confidence in the company following the failure of a $100 million rights issue in 2002.'

The focus of expansion will be the establishment of a retakaful business specialising in Islamic treaty reinsurance, likely to be established in the fourth quarter of 2005. Arig is also working on the divestment of the last two of its six non-core overseas subsidiaries. 'We are in the final stages of negotiation with interested parties for the sale of our Egyptian holding and are assessing whether our Moroccan asset should be sold to a single investor or offered publicly,' says Krueger.