Press Release

JCR-VIS Reaffirms IFS Rating of Pak Qatar General Takaful Limited

Karachi, August 27, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (PQGTL) at ‘A-’ (Single A Minus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on September 28, 2017.

The rating incorporates strong sponsor support from Qatar based financial institutions. Since the past two years, PQGTL has adopted a consolidation strategy whereby loss making portfolios have been shed off. Given the prevailing competition in the insurance market, the company also faces significant pressure on premium rates. As a result, business volumes of the company have reduced on a timeline basis. The company continues to diversify its business mix from motor oriented to other non-motor segments. On account of lower net retention, risk of the company has declined in terms of business booked. Going forward, extent of risk on own account would be an important rating driver.

With a conservative stance of the company to underwrite profitable businesses, claims ratio of the company has improved on a timeline basis. Nevertheless, loss ratios will continue to be a function of the quality of underwriting undertaken by management. Moreover, the company was able to adopt a cost cutting strategy by merging existing branches as well as centralizing its operations. With improvement in underwriting performance, the company earned a higher profit at the bottom line. Ability to maintain these performance metrics overtime will be a key rating driver.

With improvement in the bottom line, equity base of PQGTL improved. Nevertheless, leverage indicators of the company continue to remain on the higher side as compared to peers on account of current capitalization levels which would need to be strengthened. Moreover, financial leverage of the company has increased significantly on account of a higher balance of outstanding claims. Growth in insurance debt levels as a proportion of gross premium will also need to be arrested in order to improve its liquidity position.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Ms. Muniba Khan (Ext: 214) at 35311861-70 or fax to 35311872-3.

Javed Callea

Applicable Rating Criterion: Takaful Companies (December 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited