(Refiles to fix CEO's name in second and third references)
By Bernardo Vizcaino
May 7 Etiqa Takaful Bhd, Malaysia's largest
Islamic insurer and a unit of Malayan Banking Bhd,
plans to issue 300 million ringgit ($92.2 million) in sukuk as
early as this month to boost its capital, its chief executive
Last month, Etiqa Takaful set up its maiden sukuk programme,
rated AA1 by RAM ratings, designed to qualify as Tier 2 capital
in the company's balance sheet.
"Based on the latest progress, the tentative target date of
sukuk issuance will be in May," said Chief Executive Ahmad
Local-currency sukuk are common in Malaysia and several
Islamic banks have set up subordinated programmes this year to
boost their capital, but Etiqa's would be a rare issuance from a
The sukuk would be a one-off transaction classified as
Etiqa's liabilities, carrying a 10-year tenor and a non-call
provision in the first five years, said Rizlan.
Etiqa would use a musharaka structure for its sukuk, an
investment partnership arrangement in Islamic finance where
parties share profits according to a stipulated ratio and share
losses on the basis of equity participation.
Proceeds of the sukuk would be used for general business
operations, working capital and other purposes. Maybank
Investment Bank is the advisor for the sukuk.
Etiqa has a strong liquidity position although its family
takaful business has seen poor growth due to unattractive
pricing and a limited portfolio, RAM said on its rating note.
Etiqa would seek to address this by expanding its product
range while targeting higher-income clients, Rizlan said.
"Management aims to increase regular contributions, mainly
in investment-linked and ordinary family lines, to ensure
sustainable income. Initiatives include the introduction of new
products and targeting the higher-end segment of the market."
Etiqa is the largest of 12 takaful operators in Malaysia and
its plans could add pressure to competitors which might not have
the balance sheet size necessary to tap the sukuk marketplace,
while Etiqa has built a commanding market share.
Etiqa Takaful held 11.2 billion ringgit in assets as of
December, up 9.6 percent from a year earlier, representing close
to half of total takaful industry assets.
Etiqa posted a net profit of 188.5 million ringgit in 2013,
up 50 percent from a year earlier, according to company
($1 = 3.2535 Malaysian ringgit)
(Editing by Kim Coghill)