Takaful Malaysia’s split into two is a positive in the long run

KUCHING: Syarikat Takaful Malaysia Bhd’s (Takaful Malaysia) proposed split into two separate entities will be a benefit to the company in the long run says industry analysts.

Since the group’s establishment in 1985, it has been operating its family and general takaful businesses under a composite license.

However, requirements under sections 16(1) and 286 of the Islamic Financial Services Act 2013 deemed that Takaful Malaysia is due a structural reorganisation, and once completed, the group then have to operate its family and general takaful businesses under separate licences.

Since then, Takaful Malaysi has submitted its proposed structural reorganisation and request for separate operational licenses to Bank Negara Malaysia (BNM) in December 2016.

They then announced on Bursa Malaysia last Thursday that BNM had approved of their submission and would issuing a family takaful business license to Takaful Malaysia under its new name, Syarikat Takaful Malaysia Keluarga Bhd and a general takaful business license to its new wholly-owned subsidiary, Syarikat Takaful Am Bhd.

In a recent corporate update by MIDF Research, it was highlighted that the reorganisation of Takaful Malaysia would be completed by the second quarter of the next year ( 2QFY18), pending further approval from Takaful Malaysia’s shareholders and authorities.

In long run, the research arm reckoned that the restructure would be beneficial to Takaful Malaysia as it would allow the group to enhance its prospect as one of the biggest takaful provider in Malaysia.

“We under that that the said exercise will potentially create minor changes to current operations, to adapt with the transformation,” they added.

On the other hand, in the shortterm, the group is expected to experience a marginal increase in operational expenditure due to the need to hire more staff to sustain the group’s operations moving forward.

This is however not expected to be a material impact on the group’s overall performance and top line numbers as the research arm opines that the growing demand for takaful products and positive development of Islamic financial products in the local market.

“Interestingly, we note that the growth in earnings of takaful operators has consistently outperformed the conventional insurers’ over the past few years and we expect that this will continue,” shared the research arm.

Having said that, MIDF Research is reiterating its ‘buy’ call on the Takaful Malaysia stock with an unchanged target price of RM4.90 per share.