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Monday, 27 February 2012

Takaful Malaysia 2011 profit reaches RM100m mark

The country’s pioneer in Shariah-based family and general insurance Syarikat Takaful Malaysia Bhd recorded another year of strong growth in 2011, with profits exceeding the RM100 million mark for the first time in its three decades of establishment.

Takaful Malaysia attributed the improvement in profit largely to the improved investment and underwriting results along with strong business growth.

“We aim to continue outpacing the market to grow our market share. The task ahead of us is to capture a sizable portion of the expanding market as the takaful industry is expected to grow between 20% to 30%,” said the company’s group managing director Datuk Mohamed Hassan Kamil in a statement.

“Our competitors are not only the other takaful operators since many are quite recently established. We believe the real competitors are the conventional insurance companies and we need to rise to the challenge of these multinational giants,” said Mohamed Hassan.

“At Takaful Malaysia, our internal research and development (R&D) team will be constantly creating new products to ensure that we remain competitive,” he added, highlighting that the company has recently launched a new comprehensive investment- linked product, Takaful myGenLife — which was expected to achieve RM20 million first-year contributions in 2012.

In Malaysia, Mohamed Hassan said the bancatakaful and group employee benefit business have achieved substantial growth of more than 75% last year.

“This success can be attributed to strong support from our corporate clients, bank partners and loyal customers, as well as initiatives to streamline our systems and operational efficiency which enable us to serve our customers better.”

Meanwhile, he said, takaful subsidiaries in Indonesia are also beginning to show some recovery after a change in management during 2011.

“In the long term, we believe the potential for growth in Indonesia is significant and we are well positioned to capture this majority Muslim market.”

For the financial period ended Dec 31, 2011, net profit soared 204% to RM78.5 million.

The company’s profit before taxation and zakat grew 55% to RM101.4 million from RM65.3 million for the annualised 12 months in financial year 2010 (FY10) — the actual financial period for FY10 was 18 months, while its operating revenue increased by 17% to RM1.4 billion.

“The company’s return on equity continued to improve — up to 19% compared to 10.2% last year; while earnings per share rose to 48.5 sen compared to 23.1 sen for the annualised 12 months in FY10,” said Mohamed Hassan. “Total assets size has risen by about 20% to RM5.9 billion from RM4.9 billion in the period of 12 months.”

Last year, Takaful Malaysia declared an interim dividend of 7%, comprising 5% less 25% income tax and 2% single tier, which was paid on Dec 2, 2011.

Takaful Malaysia was incorporated on Nov 29, 1984, and commenced operations in July 1985. It has an authorised capital of RM500 million and a paid up capital of RM162 million.

The company provides two types of takaful business — family and general — and has over 40 outlets nationwide with total assets of RM5.9 billion at group level.

(MalaysianReserve, 27 Feb2012)

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Is Islamic Finance ready for more standardization?

As new market participants enter the scene, Shariah banking continues to grow despite the threat of a global recession. But is the industry also progressing in terms of unity and transparency?

When bankers from East and West gathered in Manama at the 18th Annual World Islamic Banking Conference in November 2011, one topic was prevalent at nearly all discussion rounds: standardization.

But while Islamic Finance is expanding to new frontiers such as Uganda, France, Egypt, South Korea and Oman, the objective to make Shariah-compliant financial products more standardized appears more and more like a far-fetched daydream. 

Let's take France, with its legal environment based on the Napoleonic Code civil. The French jurisdiction differs greatly from British Common law or Case law, the predominant legal framework in England, the centre of Islamic finance in Europe. How shall a financial solution, let's say an Islamic trade financing based on Murabaha, be used by a London-residing bank if it was legalized in France? Calls for more standardization overlook the individual nature of national jurisdictions, which still exist even in the 27-member states European Union.

The Common law is also used in the Dubai International Financial Center (DIFC), one of the major Islamic banking hubs in the Middle East, while the jurisdiction in the UAEis based on a mix of the French Code Civil and Islamic law. "Both legal environments differ too much from each other," says Houram Houssani, Partner at the GCC's largest law firm Al Tamimi & Co. in Dubai. "This is why we think the DIFC will, legally, continue to exist as a state in the state within the UAE." 

At the same time, Qatar has implemented a strict separation between Islamic and conventional banking, banning Islamic windows at all conventional lenders in the country, a first in the industry.

Divergent views on Islamic Finance's future

Anecdotal evidence also shows that the leading market participants do not agree at all in the direction Islamic Finance shall take, as has learned when from interviewing experts at conferences. One Islamic Finance consultant based in Dubai blames some banks for not operating in an Islamic way at all but "running a Shariah-bank with a conventional window". Other professionals are outraged that some financial firms try to develop Islamic derivatives or even Islamic hedge funds despite the fact that Shariah bans interest, short-selling and speculation. 

In some cases, rules set by the Islamic Financial Services Board (IFSB), one of the most accepted international standard setting organizations, are even stricter than the guidelines for the conventional world. According to Rohit Verma, product management director at Oracle Financial Services, the IFSB "has stricter capital requirements than those proposed in Basel III, with tier 1 and total capital requirements currently standing at 8% and 12% respectively. The minimum common equity requirements for Basel III are set at 4.5% and total capital requirements have been set at 8% with a 2.5% buffer," Verma writes in an article published in New Horizon (Issue October - December 2012). Although Basel III does not distinguish between conventional and Islamic banks, the rules are primarily set for the conventional world, as the Shariah finance universe stands for 1% of the global economy. 

"Focus on a few things, not many things," is a favourite piece of advice from legendary investor Warren Buffet. Maybe it is time for Islamic finance to focus on its strengths, namely to provide a non-conventional, non-interest ethical way of banking and investing rather than trying to put the whole industry under one hat, labelled "standardization", a task which seems to be "Mission: Impossible" as more participants enter the scene. 

(AmeInfo.Com, 02 Jan2012)

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