Press Release

JCR-VIS Reaffirms IFS Rating of Pakistan Reinsurance Company Limited at AA

Karachi, October 28, 2013: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) Rating of Pakistan Reinsurance Company Limited at ‘AA’ (Double A). Outlook on the rating is Stable.

The rating reflects PRCL’s dominant position in the local reinsurance market having the first right of refusal to 35% business of local insurers. The rating also incorporates strong sponsor backing with the Government of Pakistan (GoP) holding directly and indirectly, 75% shares. The company has depicted favorable trend in business volumes and earnings. Capitalization level continues to remain strong.

In 2012, PRCL was able to capture a greater portion of the business under facultative arrangement. While loss ratios in treaty business persist relatively on the higher side, prudent selection of risks under facultative arrangement has allowed the company to maintain overall loss ratio within manageable limits. Earnings from underwriting operations have posted improvement over time. Risks are placed onwards with reputable foreign companies with sound IFS ratings.

The liquidity profile of PRCL remains robust on the back of strong internal cash generation. The company carries sizeable amount of liquid assets on its balance sheet vis-à-vis total liabilities. This is despite the fact that over the years, the company has piled up significant insurance debt due to reconciliation issues with other insurers/reinsurers. In 2012, a comprehensive exercise was conducted by the external auditors to reconcile these balances. As a result, PRCL’s accounts were not qualified in relation to this issue in 2012.

The investment portfolio is both a source of liquidity and earnings. The upward rally in the stock market has improved equity portfolio valuation. Incremental exposure in recent period has mostly been built in government paper and the management intends to retain this strategy, going forward.

The position of CEO & Chairman is vacant as the previously appointed executive was called back by the GoP prior to the completion of his three years term. Moreover, the internal audit head retired in 2011 and the position is still vacant. Apart from this, there has been stability at senior management level. Full scale implementation of new ERP may need to be accelerated.

For further information on this rating announcement, please contact Mr. Abdur Rahim (Ext: 508) or Ms. Sobia Maqbool, CFA (Ext: 604) at (+92-21) 35311861-70 or fax to (+92-21) 35311873.



Javed Callea
Advisor

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.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 2013 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .