Press Release

VIS Reaffirms IFS Rating of Pak Qatar General Takaful Limited

Karachi, January 22, 2021: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (PQGTL) at ‘A-’ (Single A Minus). The rating signifies high capacity to meet policyholder and contractual obligations. Risk factors may vary over time due to business/economic conditions. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on November 1, 2019.

The rating assigned to PQGTL incorporates financial profile of its key shareholders, which mainly include Qatar-based financial institutions. The rating also takes into account the company’s operational track record and direct market outreach, which presently spans across 9 cities of Pakistan. In addition, the company maintains indirect presence in other cities, through the distribution network of its associate concern.

In the latest period under review, growth in PQGTL’s business volumes lagged the industry. The slowdown in business can be attributed to a combination of factors, mainly the company’s underwriting strategy to focus on profitable business, as a result of which loss-making business has been shed off. In addition, fierce competition in the non-life insurance market and slowdown in automobile sales, which is the most prominent line of business for PQGTL, were also major reasons.

In 2019, the company’s underwriting profitability came under pressure, mainly on account of a slight uptick in net claims ratio. Given the uptick in claims ratio and the additional net acquisition cost, the company’s combined ratio has increased, albeit it is aligned with the peers. Investment performance depicted improvement, in tandem with the upswing in stock market performance; the same has also reflected on the company’s bottom line, which grew by 12% in 2019 despite the weakening in underwriting profitability.

The assigned rating incorporates sound credit quality of the reinsurance panel and prudent net retention. With increased investment in liquid instruments, in combination to shrinkage in net technical reserves, liquidity indicators have improved on a timeline. Decreasing trend in insurance debt to gross premium has been noted, which translates in lower credit risk for the company. The company’s equity base has improved, mainly on account of reversal of unrealized losses as the equity markets rebounded. Given limited growth in underwriting, particularly in 9M’20, operating leverage of the company has dropped. Furthermore, financial leverage has also been reduced.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Mohammad Arsal Ayub (Ext: 216) at 35311861-70 or fax to 35311872-3.

Faryal Ahmed Faheem
Deputy CEO

Applicable Rating Criterion: Takaful Companies (June 2019)

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