Syarikat Takaful Malaysia Bhd

Syarikat Takaful Malaysia Bhd which is not discounting the possibility of a merger and acquisition (M&A), is in the midst of finalising its corporate structure in line with requirements under the Islamic Financial Services Act (IFSA) 2013.

Under the Financial Services Act and IFSA, which came into force on July 1, 2013, composite insurers and takaful players are, among other rules, required to split their life and general insurance businesses under separate licences.

IFSA requires composite takaful operators to operate under separate licences with effect from Jan 1, 2018.

Syarikat Takaful Malaysia group managing director Datuk Seri Mohamed Hassan Kamil (pic) told StarBiz the company was in the process of complying with the IFSA to have separate licences for the family and general businesses with its management team working closely with regulators, consultants and lawyers.

“We are working closely with the regulators to finalise the corporate structure post separation of the general and family takaful businesses.

“Clear plans and milestones have been put in place to segregate some of the business functions. Investing in training and hiring the right candidates to support the future business operations are some of the steps taken.

“Takaful Malaysia expects the operating cost will increase after the separation of licences and that will impact the earnings in the initial years.

“However, we are optimistic that this change will also provide greater growth opportunities in the long term and the company will be able to manage the short term pressure in earnings through active and disciplined expense management,’’ he said.

On whether the move to have separate licences will impact the company’s capital, Hassan said although the corporate structure would affect the level of capital required for both the general and family takaful businesses, it would continue to exercise prudent and active risk management to optimise the level of capital required under the current risk-based capital regime to maximise shareholders’ value.

Analysts contacted agree that the splitting of licences under the IFSA could spur M&As in the takaful space as more capital is needed to run separate entities.

This to an extent could pave the way for stronger capitalised takaful operators to acquire smaller and less capitalised ones.

Commenting on Takaful Malaysia’s move for M&A, Hassan said that “business expansion through M&As can be a quick way to achieve the optimum company size to compete more effectively after the separation of licenses.

“However, we will only explore this option if it can clearly add superior shareholder value to Takaful Malaysia and the new acquisition can complement the company’s business growth strategy. We are yet to venture into such an initiative at the moment.”

Meanwhile, he said the company expects its family takaful business to continue to be the main contributor for earnings this year despite the challenging economic climate.

Premiums from the family takaful business accounted for about 70% of the company’s total premiums in 2016.

Takaful Malaysia is the market leader in the family takaful industry and has been the frontrunner for employee benefits products for the past few years.

For the third quarter ended Sept 30, 2016, Takaful Malaysia’s net profit surged by 30% to RM44.86mil from RM34.42mil a year ago.

Revenue for the period was higher at RM426.97mil, compared with RM389.24mil previously.

One of the company’s strengths which has differentiated it from its competitors is the 15% no-claim cash back policy – the highest in the takaful industry.

The policy offers a 15% cashback payout to customers should they make no claims during the coverage period.