The world’s Takaful market has been a hive of activity in April with new products being launched and the announcement of several deals and acquisitions from Malaysia to Saudi Arabia. Mohamed Hairul Borhan reports
Malaysia’s largest reinsurer, MNRB Holdings is planning to invest $17.7 million cash for a maximum of 9.99 per cent stake in UK-based British Islamic Insurance Holdings (BIIH). This was in response to a private placement exercise carried out by the insurer which involved the issuance of up to 480 million new ‘A’ shares at $0.25 per share. MNRB’s portion amounts to 71.68 million of such shares.
MNRB said that it will fund the transaction entirely by internally-generated funds and expects the shares subscription to be completed by 30 June. It may also have a representation on BIIH’s board.
In a filing with Bursa Malaysia, MNRB said that the proposed investment is in line with its objective of diversifying its existing business in order to achieve a better portfolio mix and ensure sustainable growth. It added that BIIH will serve as the group’s platform to expand further into overseas markets, including the potentially lucrative European market.
However, Sufyan Ismail, chairman and chief executive of UK-based independent financial adviser 1st Ethical does not believe that such a move would have much impact. He said, “The sale may help BIIH obtain extra liquidity to help in its marketing efforts, especially in the light of the recent liquidity crunch. However, whether it helps MNRB to penetrate the European market is another issue. Although companies are allowed to sell their products in any of EU’s market, each country’s needs and business climate differ and it might prove to be a challenge for MNRB.”
While it is currently not-listed, BIIH has plans to list its shares through an initial public offering on the Alternative Investments Market of the London Stock Exchange. It is also aiming to have a secondary listing on at least one GCC stock exchange in the future.
Also in Malaysia, Manulife Insurance (Malaysia) has announced its intention to enter the family Takaful business should any licenses be given out by the regulator, said chief executive Peter Robertson.
The company is currently undergoing a restructuring which will see it relisting itself as Manulife Holdings, paving the way for it to move into other areas of financial services other than insurance. For the Takaful business, Robertson added, that it would be a subsidiary of the holding company instead of the life company.
For the financial year ended 31 December 2007, Manulife recorded a 68 per cent growth in net profit to $26.56 million compared to the year before. Its basic earnings per share also jumped 68 per cent to $0.13 per share.
Besides this, Malaysian-based Maybank’s insurance and Takaful holding company, Mayban Fortis Holdings, announced that it had signed a memorandum of understanding with PT Panin Life Tbk of Indonesia to start talks on a 60 per cent acquisition of its subsidiary, PT Anugrah Life Insurance.
Mayban Fortis will be the legal entity to pursue the proposed acquisition and this arrangement has already been agreed upon by its board as well as that of its joint-venture partner Fortis. It has also received the approval for the proposed acquisition from the country’s regulator, Bank Negara Malaysia.
The move to bring in Mayban Fortis was to adhere to a rule by Indonesia’s finance ministry which required a foreign holding company to control a majority of its portfolio in the insurance business should it wish to become a shareholder of a local Insurance company.
Still in Malaysia, the country’s oldest Takaful operator, Syarikat Takaful Malaysia Berhad (STMB), has lost its AA (SQR) rating from the Islamic International Rating Agency (IIRA) due to non-renewal of the rating agreement.
"IT IS EXPECTED TO BEGIN OPERATIONS THIS YEAR AND WILL INITIALLY OFFER A RANGE OF TAKAFUL LIFE AND HEALTH INSURANCE PRODUCTS AND PENSION PLANS TO RETAIL AND CORPORATE CUSTOMERS IN THE GULF.FAHAD AL RAJAAN, CHAIRMAN OF AHLI UNITED BANK."
During a review meeting, it was noted that two senior management staff from STMB’s Shari’ah compliance department had resigned.
This announcement withdraws STMB’s right to use its rating of AA for any purposes or in any of its disclosures.
Aside from this, STMB has unveiled its first Shari’ah compliant capital protection investment linked fund, Takafulmyal-Afdhal, designed to cater to the needs of investors seeking a sophisticated Shari’ah compliant investment combined with Takaful protection.
The product has been targeted at investors interested in exploring an alternative platform to regular fixed deposit type products and features a consistent income via annual distribution of profits throughout its investment tenure.
STMB said the product was innovatively structured to provide 100 per cent capital protection while returns were benchmarked against the performance of the best performing investment portfolios, combining selected international indices related to global equities, commodities and fixed income.
Takafulmyal-Afdhal is managed by STMB with Citibank as the structure provider, offering an investment instrument ranging from a minimum investment of $2187.50 up to $3.125 million. The offer period runs from 2 May 2008 to 15 June 2008.
Muhamad Hassan Kamil, group managing director, said that Takafulmyal-Afdhal provides the best package for investors by providing an all-weather investment plan with potentially higher yields coupled with Takaful protection as an added advantage.
HIGH PROBABILITY
Adding to that, Azian Kassim, STMB’s chief investment officer, said that the reference indices which will act as the benchmark for the returns have been meticulously chosen after thorough analysis to ensure that STMB is capable of bringing a complete host of portfolio that has a high probability of generating strong returns over the specified investment period.
Remaining in Malaysia, Takaful Ikhlas is aiming to increase the number of its policyholders by 4 per cent to 520,000 by the accounting year ending 31 March 2009, up from 500,000 currently. It has also targeted $150 million in premiums for this fiscal year, largely driven by products under the general and family Takaful segments. For the 2009 financial year, it has targeted $162.5 million in premiums.
In addition, president and chief executive Syed Moheeb Syed Kamarulzaman said the company is aiming to collect $21.87 million in premiums from subscribers to its government housing loan scheme for the financial year ending 31 March 2009, up from $12.5 million in the previous year.
He said the company was confident of achieving the target due to the good response from government servants towards the scheme since it was launched 20 months ago. He also expects the number of participants under the company’s housing loan scheme to increase to 29,000 this year from 14,000 last year.
Takaful Ikhlas was appointed to the government housing loan panel on 8 August, 2006, to offer its Takaful packages to the borrowers. It currently offers two insurance plans: Ikhlas Takaful Gadaijanji and Ikhlas Takaful Pemilik Rumah.
Over in the Middle East, UAE-based Salama Islamic Arab Insurance Co has launched a slew of family Takaful products for the UAE market, the second largest Takaful market in the region after Saudi Arabia.
In addition, the company, already one of the largest Takaful companies worldwide with a paid-up capital of $274 million, is also planning to diversify its range of family Takaful offerings in all markets it operates in this year to take advantage of the growing opportunities globally, said Saleh Malaikah, vice-president.
"THE PRODUCT HAS BEEN TARGETED AT INVESTORS INTERESTED IN EXPLORING AN ALTERNATIVE PLATFORM TO REGULAR FIXED DEPOSIT TYPE PRODUCTS AND FEATURES A CONSISTENT INCOME VIA ANNUAL DISTRIBUTION OF PROFITS THROUGHOUT ITS INVESTMENT TENURE."
Another company in the UAE reaping the rewards of the booming Takaful industry is Dubai Islamic Insurance and Reinsurance Co (Aman). At its annual general meeting, the company’s board approved a 10 per cent cash dividend as a result of its performance in 2007.
Hussain Al Meeza, chief executive and managing director, said net profits reached $11.33 million in 2007, up 79.29 per cent year-on-year. He attributed the increase in the insurance premiums issued in 2007 over the premiums issued in 2006 to the company’s “excellent services” and its effort to offer a comprehensive range of Takaful products. Aman has also set up several additional offices in the UAE.
In Bahrain, Ahli United Bank has signed a memorandum of understanding with UK-based Legal & General Group to form an equal-holding, joint-venture Takaful company. It will be headquartered in Bahrain and have authorised capital of $200 million, subject to necessary regulatory and statutory approvals.
It is expected to begin operations this year and will initially offer a range of Takaful life and health insurance products and pension plans to retail and corporate customers in the Gulf. Fahad Al Rajaan, chairman of Ahli United Bank, said Legal & General has extensive experience in the insurance sector and will provide the technical and operational expertise for the joint-venture company. Coupled with the bank’s expanding regional distribution network, the new entity will provide the framework to cater for the increasing and diversified insurance needs within the Gulf, he added.
Also in Bahrain, the Bahrain Institute of Banking and Finance (BIBF), has boosted its range of educational offerings. It has unveiled a Takaful programme which is accredited by UK’s Chartered Insurance Institute (CII). The first exam is scheduled to be held in October.
Hussain Al Ajmi, the institute’s head of insurance, said the programme will culminate in an internationally recognised certification, while Lee Gladwell, director of the CII’s general insurance markets, said the partnership will help foster the growth of Takaful in Bahrain and the Middle East. Gladwell added that the programme will be open for UK applications from September onwards.
The programme will cover key topics such as Shari’ah practice and perspective; comparative analysis between conventional and Takaful companies; accounting standards for Takaful; surplus and loss distribution; structure and operations of Takaful companies; as well as family and general Takaful products.
Currently, the textbook for the programme is being developed by seven academic and professional experts from around the world. There are also plans to develop an Arabic version of the textbook in the future, BIBF said.
DEMAND
Mohammad Khan, director of Takaful, actuarial and insurance services at PricewaterwaterhouseCoopers LLP, said, “Any course that helps to improve the standard of Takaful worldwide, is good for the industry and will always be welcomed. There is demand for such courses and people will sign up for them if they offer good value.”
In Saudi Arabia, Amlak International has entered into an agreement with Sabb Takaful Co. to offer its corporate and retail customers Sabb Takaful’s range of family and general Takaful products.
David Hunt, managing director of Sabb Takaful, said the agreement would enable the company to provide its range of Takaful products to all Amlak’s customers, giving them the chance to choose the different options available when deciding to buy a house or finance a project.
Sabb Takaful’s portfolio includes saving and protection, and provides individuals with financial support, and institutions and individuals with general Takaful cover, such as travel, home and marine cargo.
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