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Crescent Star Insurance to buy shares of Pak Kuwait Takaful

By Salman Siddiqui
January 06, 2016

KARACHI: The Crescent Star Insurance Limited (CSI) is to buy majority shares of Pak Kuwait Takaful Limited with management control, subject to regulatory approval, according to a bourse filing on Tuesday.

"CSI has singed Memorandum of Understanding for acquisition of 62.5 percent controlling shares of Pak Kuwait Takaful Limited, subject to all necessary legal and corporate approvals from the relevant regulatory authorities," said Mehtab Alam, company secretary, in a communiqué to the Karachi Stock Exchange (KSE).

CSI CEO and Managing Director Naim Anwar said, "The deal is almost done...Pak Kuwait Takaful (majority shareholders) is to take permission for the sale from Securities and Exchange Commission of Pakistan (SECP). It is expected to put up the case with the regulator in a day or two."

The deal would be executed as soon as the regulator grants the required permission. "Usually SECP takes 30-60 days to grant the permission...if it would do so in two days time, the acquisition would be made in two-three days time," he said.

"We would disclose the price of the acquisition later on," Anwar said.

The acquisition would allow CSI, a conventional insurance firm, to also operate in Islamic insurance (Takaful) sector. "We would run the Takaful firm as a subsidiary," he added.

"The other option, we had, was to apply for acquisition of a licence to SECP to operate a Takaful window at our conventional business offices with minimum Rs50 million cash in bank account…but in this case, we have to start from zero in the Islamic insurance sector," he said.

"Pak Kuwait Takaful is a good running business with a premium base of Rs600-700 million and with good cliental portfolio… It is in operation for around a decade now," Anwar said.

He said they would get the firm listed sometime in 2016 and 2017 after acquisition. "This is part of our business strategy. The listing would help us raise funds to expand the business in future," he said.

The acquisition would expand CSI business nationwide with the addition of 15-20 branches of Pak Takaful Kuwait. CSI is also managing some 18-20 branches in the country.

He said the current management acquired CSI in 2013, which was a 58-year-old firm at that time. At that time, the size of paid up capital size of the firm was at Rs121 million. "This will grow to Rs821 million by February 2016 when its current transaction of issuance of Right Shares gets completed."

The conventional insurance firm offers insurance policies in the sectors, including motor, health, fire, marine, engineering, travel, livestock, and corporate. The acquisition would add to the scope of its business. "The acquisition of a license from SECP to offer insurance policy for natural death, which is called life insurance, would complete CSI as a group insurance firm… the acquisition of this separate license is part of our future business strategy," Anwar said.

The firm has diversified its investment portfolio in the last two years. "We have invested in a food chain of America called Golden Chicks and Dost Steel. Both the new businesses will be fully operational by March 2016," he said.

"Our shares are the most wanted and tradable shares at the KSE in the insurance sector," he said quoting a study on volumes conduced for the last six months.  CSI recorded trade in 326,000 shares, and fell by 17 paisas to Rs12.98 at KSE. Its Right Share witnessed trade in 615,500 shares, as it increased by 12 paisas to Rs3.38.