Buletin Takaful

Source: Business Times, 1st October 2009

FITCH Ratings has today affirmed the Insurer Financial Strength (IFS) Rating of Malaysia-based HSBC Amanah Takaful (Malaysia) Sdn Bhd (HSBCAT) at ’A-’. The outlook is stable.

Fitch views HSBCAT as an important member of HSBC Holdings Plc (’AA’/Negative) and its rating is underpinned by the group’s ability and willingness to provide on-going support.

HSBCAT benefits tremendously from its parent’s well-recognised brand name, product and distribution capabilities, and other management resources.

The rating also reflects HSBCAT’s healthy capitalisation, conservative investment mix and prudent management.

However, it is constrained by the takaful operator’s limited track record, modest size, possible execution risks of operating plan, as well as the competitive and evolving nature of the overall takaful operating environment.

Additionally, the takaful operator is challenged to manage its expenses in balance with business growth.

HSBCAT’s capital, represented by equity capital and retained earnings, with no constraints on financial and operational flexibility, is considered of good quality. The agency cautions that it is important for the operator to maintain its capital level commensurate with its portfolio, as it grows its business.

Since its inception, the company’s asset allocation has been conservative; at the fund and operator level, investments reside mostly in cash and fixed deposits, as well as government/ Islamic papers. Fitch views the investment strategy, which places principal protection before return maximisation, as prudent.

However, the agency notes that HSBCAT is somewhat constrained by the limited depth and breadth of Malaysia’s Islamic bond market.

HSBCAT follows a modified Wakala (agency) model, whereby the takaful operator receives a Wakala fee for the management services it provides to the participants, as well as an incentive fee, expressed as a percentage of surplus from the risk funds.

Under this model, HSBCAT’s profitability is determined, to a large extent, by its Wakala fee income and expense level.

In Fitch’s opinion, the execution risks inherent in HSBCAT’s business plan are mitigated by the group’s management support.

HSBCAT was incorporated in 2006 as a composite takaful operator. At present, the company is 49 per cent-owned by HSBC Insurance (Asia-Pacific) Holdings Ltd, 31% by Jerneh Asia Bhd and 20 per cent by the Employees Provident Fund Board.

HSBCAT’s key products include homeowner takaful, mortgage life and investment-linked plans.