Press Release

JCR-VIS Reaffirms IFS Rating of Alpha Insurance Company Limited

Karachi, January 31, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Alpha Insurance Company Limited (AICL) at ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 15, 2015.

Current rating of AICL derives strength from financial profile and demonstrated support of its sponsor, State Life Insurance Corporation of Pakistan (SLIC). SLIC is the largest life insurance company in the country and is owned by the Government of Pakistan. Assigned rating continues to be constrained by persistent trend in underwriting losses, high levels of insurance debt & outstanding claims.

Gross premium written by the company has witnessed a noticeable decline on a timeline basis, primarily attributable to frequent changes in the top management over the years. The company has also made concerted efforts towards improving its overall control environment which diverted the company’s focus from business development, during 2017. Going forward, AICL anticipates higher business volumes with a prudent underwriting practice. In order to achieve its projected level of premiums, the company has revamped its sales force and distribution network. In addition to the financial support demonstrated by SLIC, the sponsor has also provided AICL support through its marketing and business development avenues. Developments in this regard are yet to materialize.

During the outgoing year, the company incurred significant underwriting losses emanating from claims reported in its fire and engineering segment. Moreover, despite support from investments, operating loss increased in the ongoing year. As per management, corrective measures taken for improving its internal controls will help arrest this deteriorating performance. Nevertheless, with low business volumes, underwriting expense ratio and subsequently combined ratio are reported at more than 100%.

Liquidity profile of the company also weakened with insurance debt in relation to gross premium being sizeable at 75.9%. Ageing profile of insurance debt also depicts room for improvement given that a large chunk belongs to receivables outstanding since 2009; recoveries in this regard are ongoing. Nonetheless, capitalization levels of the company are considered adequate as evident from low leverage indicators. During 2017, SLIC injected fresh capital into AICL in order to meet the minimum paid up capital of Rs. 500m, as per regulations.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Rating Criteria: General Insurance (March 2017)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited