Business Takaful

Source: Business Times, 24 March 2008

MAA Holdings Bhd (MAAH) has offered AmAssurance Bhd 10 per cent of its Islamic insurance arm as part of a bigger deal to sell its general insurance business, a source said.

“MAAH has been reeling from solvency issues that turned the company into the red last year. Offering a minor stake in MAA Takaful Bhd (MAAT) would sweeten the deal for AmAssurance,” the source said.

AMMB Holdings Bhd holds 70 per cent of AmAssurance and a similar stake in AmG Insurance Bhd, the group’s general business arm.

MAAH plans to sell its general insurance business to AmG Insurance.

For AMMB, having an Islamic insurance arm would complement its existing Islamic banking business.

Last Tuesday, the central bank gave its nod for talks that could lead to AmAssurance buying a stake in MAAT.

MAAH chief executive officer and group managing director Muhamad Umar Swift told Business Times that “both parties are only looking at a minority stake”.

“AmAssurance will acquire a minority stake from MAAH,” said Umar, adding that the smart partnership is expected to reduce costs of maintaining a world-class operation in MAAT.

If successful, AmAssurance will be the second partner with an equity stake in MAAT.

MAAT is a joint venture between MAAH and Bahrain-based Solidarity Co BSC. Solidarity paid RM25 million for a 25 per cent stake in MAAT, while the balance is held by MAAH.

“Should the deal go through, we anticipate that the above the transaction will be finalised during the second half of 2008, subject to the relevant authorities approval being granted,” Umar said.

He said MAAH is always on the lookout for opportunities to create value.

“In this connection, though MAAT only commenced operations during the second half of 2007 and as such is very much a new company, there is great potential to grow,” he added.

AmAssurance has been eyeing a takaful business and was believed to have missed out on the four takaful licences issued by Bank Negara Malaysia in 2006.

Malaysia’s Islamic insurance industry, in which several Middle Eastern takaful and retakaful companies have a presence, is predicted to grow to RM7 billion by 2010.