Press Release

VIS Reaffirms IFS Rating of Alpha Insurance Company Limited

Karachi, October 20, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Alpha Insurance Company Limited (AICL) at ‘A’ (Single A). 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 ‘Negative’. The previous rating action was announced on June 28, 2019.

Rating derives strength from AICL being a subsidiary of State Life Insurance Corporation of Pakistan (SLIC), the largest life insurance company of the country and owned by the Government of Pakistan. Assigned rating also takes into account the stability and experience of the management team. Strong re-insurers have been maintained on the company’s panel. Leverage and liquidity indicators remain conservative and allow significant room for growth.

Despite support from investments, underwriting loss in the ongoing year has remained significant on account of low business volumes. Given the level of business volumes in first half of 2020, underwriting losses are expected to continue. With improvement in investment performance, the company reported a positive bottom line, at end-2019. Nonetheless, low business volumes and a significant underwriting expense ratio, combined ratio are reported at more than 100%. Ability to grow business volumes to self-sustainable levels will be a key rating driver, going forward.

While reduced economic activity is likely to have a positive impact on claims ratio, expenses are likely to remain sticky, which should resultantly increase underwriting expense ratio. Subsequently, the combined ratio is likely to remain range bound. Ability to maintain performance metrics will remain a challenge given the prevalent competition faced by the industry players.

Insurance debt in relation to gross premium is considered sizeable at 54.4%. 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.

For further information on this rating announcement, please contact the Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 201) at 021-35311861-70 or email at info@vis.com.pk.

Javed Callea
Advisor

Applicable Rating Criteria: General Insurance (November 2019)
https://www.vis.com.pk/kc-meth.aspx

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