Profile: Dawood Takaful expects to reach break-even point soon

CEO satisfied with company’s show over the last six years.

KARACHI:

Dawood Family Takaful is expected to break-even in 2014 by turning a profit in the sixth year of its commercial operations, according to the company’s chief executive officer Rizwan Ahmed Farid.

Talking to The Express Tribune in a recent interview, Farid said the performance of his company has been exemplary because few insurance/Takaful companies in Pakistan have generated this kind of business in the early years of their establishment.



According to the company’s latest financial statements available to the public, total gross contributions of Dawood Family Takaful were Rs523.3 million in 2012 as opposed to Rs326.2 million in 2011, reflecting a year-on-year increase of 60.4%.

However, the company made a net loss of Rs42.9 million in 2012 compared with a loss of Rs90.3 million in 2011.

Other than the Dawood Family Takaful, Pak-Qatar Family Takaful is the only Islamic insurance company in the life segment operating in the country. Pak-Qatar Family Takaful posted its first profit in the fifth year of operations.

The life-segment of Pakistan’s Islamic insurance market is rather miniscule compared with its conventional counterpart which collected gross premiums of Rs85 billion in 2012, as per the latest available figures.

In contrast, regular contributions on individual policies − excluding top-up and single contributions − collected by the two family Takaful companies in 2012 amounted to Rs2.5 billion. Dawood Family Takaful’s share of that figure was Rs408.8 million, which translates into a market share of roughly 16%.



It is surprising that such a lucrative market with a low gestation period and amazingly high growth rates should only have a couple of players, even though the Securities and Exchange Commission of Pakistan (SECP) had issued rules governing the Islamic insurance industry back in 2005.

The reason, according to Dawood Family Takaful’s CEO, is the inconsistent policy of the regulator with regard to Islamic window operations to be set up by conventional insurance companies.

Takaful Rules 2005 stated that no windows would be allowed for the first five years at least. But there were talks of allowing conventional insurance companies to set up Islamic windows as early as 2008, Farid said, which discouraged interested companies from entering the market.

“I know of at least three companies that were planning to set up standalone Takaful firms here. We had also raised the money and applied for permission to set up a separate general Takaful company. But reports about Islamic window operations changed everything,” he noted.

The SECP notified Takaful Rules 2012 in July of that year under which conventional insurance companies were allowed to carry on Takaful business through window operations. All general and Takaful companies went to court against the decision and the case is currently sub judice.

Farid said revenue growth in the first nine months of 2013 was 36% compared with the same period in the preceding year (the company does not make its quarterly accounts publicly available). Noting that about 22% of new business is traditionally generated in December every year, he said the revenue growth rate for 2013 is expected to be over 60% as well.

Commenting on the avenues for investment, Farid said more Ijara sukuks and government-guaranteed bonds should be issued to provide Takaful companies with riba-free investment opportunities. “As a conservative vehicle for investment, we want to put more money into government securities,” he said, adding that the company’s funds under management are growing by Rs3 million a week these days.

Published in The Express Tribune, January 12^th, 2014.

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