Press Release

JCR-VIS Assigns Initial IFS Rating to Pakistan Reinsurance Company Limited

Karachi, October 12, 2018: JCR-VIS Credit Rating Company Limited has assigned initial Insurer Financial Strength (IFS) rating of ‘AA’ (Double A) to Pakistan Reinsurance Company Limited (PRCL). The rating signifies very high capacity to meet policyholder and contract obligations. Risk is considered modest but may vary slightly over time due to business /economic conditions. Outlook on the rating is ‘Stable’.

The rating incorporates strong sponsorship with the sovereign holding 75% through direct and indirect investments. PRCL is the sole local re-insurer in the country enjoying a significant market share by virtue of having the first right of acceptance up to 35% of the treaty business. With its monopolistic position in the market, PRCL plans to increase its share of business, which is currently below the stipulated limit in most cases owing to selective business underwritten over the years. In line with an aggressive growth stance, the company may need to consider reducing exposure on its net account. During the outgoing year, loss ratios of the company increased depicting weakening in the underwriting profile; however, the same showed improvement with combined ratio reported at 89.1% in the first half of 2018. Ability to maintain underwriting performance metrics will be a key rating factor in the coming years.

Current rating of the company derives strength from its sound liquidity and capitalization indicators. Moreover, leverage indicators have remained low indicating significant room for growth. Over the period under review, bottom line of PRCL was supported by booking significant income from disposal of investments. Given the downward trend in the equity market and current interest rate scenario, ability to maintain healthy return from investments would be challenging. Investment portfolio of the company continues to be a mix of equity and government paper.

During the period under review, PRCL experienced a change at the helm with appointment of a new Chief Executive Officer. A management level change was also witnessed at the position of Chief Financial Officer. Revamping of its underwriting, claims and reinsurance departments was undertaken by adding additional resources. Investment management team was also bolstered. Going forward, stability of the management team, which is being addressed, is considered important to achieve long term objectives of the company. Management has also made concerted efforts in improving the governance and internal control framework of PRCL.

For further information on this rating announcement, please contact Mr. Atiq Anwar Mahmudi (Ext: 208) or Ms. Muniba Khan (Ext: 214) at 35311861-70 or fax to 35311873.

Jamal Abbas Zaidi

Applicable Rating Criteria: General Insurance (September 2016)

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