Sale of Bosnian SARAJEVO Insurance Company raises heated discussions

FBiH Government's green light for the sale of its 45.5% stake in SARAJEVO Insurance has caused an avalanche of criticism, mostly related to the target price set for the transaction.

Both the opposition and a part of the ruling coalition disagreed with the government's decision, arguing that the price does not correspond to the real market value of the company. Yet, the low price seems justified considering the failure of previous privatization attempts.

Antagonists of the governmental initiative argue that, beside the too low price, choosing to sell in a direct settlement instead of selling blocks of shares on the stock market gives space to non-transparent decisions, with no mechanisms in place for review and correction, which may harm the public interest. In addition, it promotes the idea that the Governments wants to sell the company by all means, for any price.

On the other hand, the Government's attitude may be justified both by the previous experiences and the difficulties encountered in putting the company on the right track in terms of solvability. The first auction was made for an overall price of KM 27.39 million (~EUR 14 million), then the price was decreased to KM 22 million, but the best bid received was of only KM 15 million.

Moreover, as an official notification of the Federal Insurance Supervision Agency shows, the company has a pronounced liquidity problem which prevents it to satisfactorily fulfill its obligations arising from insurance contracts. The state, as main shareholder, didn't manage to improve the situation.

Yet, the company owns valuable buildings and other non-operational assets, worth about KM 50 million according to some opinions, which would justify asking for a higher price. An analysis based on public available data, quoted by the Croatian insurance portal osiguranje.hr, concludes that a fair price to ask for the state's share package would be of about KM 18.6 million.

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