Swiss insurer Zurich Insurance Group AG (Zurich Insurance) is set to wholly take over MAA (Malaysian Assurance Alliance) Takaful, after the deal received regulatory approval from Bank Negara Malaysia (BNM) – Malaysia’s central bank – Reuters reported on April 27.
The disposal of the 75% stake on the part of MAA Group Berhad (MAA Group) is subject to regulations under the Islamic Financial Services Act 2013 (IFSA), which stipulates that the transaction has to secure the prior approval of the Finance Minister, with the recommendation of BNM.
MAA Takaful is one of Malaysia’s 11 Islamic insurers. It was founded in February 2006 as a joint venture between MAA Group and Solidarity Company BSC(c) of Bahrain (Solidarity), both of which hold a 75% and 25% stake, respectively.
The deal to acquire MAA Takaful was first proposed in June last year, although the value of the transaction is undisclosed. On November 30, 2015, MAA Group, Solidarity and Zurich Insurance jointly submitted an application to enter into an agreement for the proposed disposals.
This venture into Islamic insurance is said to allow for greater penetration into Zurich Insurance’s core markets in the Gulf and Southeast Asia, in addition to strengthening its presence in Bahrain, Qatar and the United Arab Emirates. It also marks the entry of Europe’s fifth-biggest insurer into the world’s second-largest Islamic insurance market.
An alternative to conventional insurance, takaful is based on the concept of mutuality, whereby members contribute money into a pooling system to guarantee each other against losses or damages.
Takaful-branded insurance is based on shariah principles, which prohibits elements of gambling, alcohol, interest and pure monetary speculation, all of which are outlawed under Islamic principles.
As of June 2015, MAA Takaful held 1.2 billion ringgit (US$306.1 million) in AUM, a 5% increase from a year earlier. Its parent company, MAA Group – which is listed on Malaysian bourse Bursa Malaysia – has been plagued with funding issues despite claiming to be relatively cash-rich, according to a report by local daily The Star.
MAA Group has been classified by Bursa Malaysia as a Practice Note 17/2005 (PN17) company since 2011, when it first disposed of its conventional insurance arm. Companies classified as PN17 are companies that are deemed to be under financial distress.
MAA Group had told The Star recently that its activities have been restricted by provisions under the IFSA due to its involvement in the takaful business, but a turnaround is expected soon with the disposal of its takaful unit.
Under its takaful business, the general takaful division recorded a 3.2% decrease in total gross earned contributions to reach 277.6 million ringgit for 2015, whereas the family takaful division registered a 31.8% decrease in total gross earned contributions amounting to 250.7 million ringgit.
(Asia Aset Management / 04 May 2016)---
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com