This article first appeared in The Edge Financial Daily, on May 5, 2016.

KUALA LUMPUR: MAA Group Bhd is selling its 75%-owned subsidiary MAA Takaful Bhd to Zurich Insurance Co Ltd for RM393.75 million cash.

In a filing with Bursa Malaysia yesterday, MAA Group said its original costs of investment in MAA Takaful were RM75 million.

Assuming that the proposed disposal had been completed on Dec 31, 2015, MAA Group expects to record a pro forma non-recurring gain on disposal of RM289.5 million.

This follows the group receiving approval from the finance minister, vide Bank Negara Malaysia’s letter dated April 27, for the proposed disposal.

Solidarity Group Holding BSC, which holds the remaining 25% equity interest in MAA Takaful, will also be disposing of its stake to Zurich for RM131.25 million.

MAA Group said it and Solidarity had signed an agreement with Zurich for the proposed disposal of MAA Takaful for a combined RM525 million.

MAA Group also said after the completion of the disposal, the board is proposing to declare an interim special dividend of 35 sen per MAA Group share, amounting to approximately RM100.8 million, at an entitlement date to be determined and announced later.

“The total amount under the proposed special dividend shall be payable out of the disposal consideration,” it added.

“It is the intention of the board to maintain the listing status of MAA Group and to utilise the remaining proceeds of RM196.7 million [after deducting estimated expenses relating to the proposal of RM2.5 million] to acquire prospective new businesses and/or assets within 24 months from the completion date,” said MAA Group.

However, it said it had not identified any potential investment opportunities. “The board is still evaluating options for the optimal utilisation of the said proceeds inorder to maximise its shareholder value.”

MAA Group said the proposed disposal provides an opportunity for it to unlock and realise the value of its investment at an attractive valuation amid an increasingly competitive insurance and takaful sector.

“The proposed disposal is timely and [MAA Group] is of the view that as a stand-alone takaful company without banking business nor strategic partnership, prospects for MAA Takaful will be challenging.

“Therefore, the proposed disposal represents a good opportunity for the group to unlock the value of its investment in MAA Takaful, as well as for the company going forward,” said MAA Group.

MAA Group shares closed unchanged at RM1.06 yesterday, with a market capitalisation of RM305.16 million.