Press Release

VIS Maintains IFS Rating of Alpha Insurance Company Limited

Karachi, June 28, 2019: VIS Credit Rating Company Limited (VIS) has maintained 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 ratings has been revised from ‘Stable’ to ‘Negative’. The previous rating action was announced on January 31, 2018.

Rating incorporates the implicit support of parent company, State Life Insurance Corporation of Pakistan (SLIC), the largest life insurer of the country. Change in outlook takes into account declining business volumes, significant underwriting losses and frequent changes in the senior management. However, the company benefits from its equity base which compares favorably to peers. This capitalization level, though eroding on a timeline basis, keeps leverage indicators within manageable levels.

Since the past four years, gross premium of AICL has depicted a declining trend on account of stiff market competition along with a consolidation strategy adopted to underwrite profitable businesses. Given the prevailing competition, the company also faced significant pressure on premium rates. Ability to grow business volumes to self-sustainable levels will be a key rating driver, going forward. In order to reduce reinsurance expenses, the company has also renegotiated its proportional treaties with non-proportional treaties. Going forward, the company plans to grow its motor and miscellaneous related segments, a large proportion of which are retained on net account. Risks associated with these segments would be assessed over time.

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. However, with control on expenses, the company was able to earn a positive bottom line in 1Q19. Ability to maintain positive trend in performance will be a key rating factor. Combined ratio remained more than 100% with liquidity indicators comparing less favorably to peers.

For further information on this rating announcement, please contact Mr. Atiq Mahmudi (Ext: 208) or Ms Muniba Khan (Ext: 215) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: General Insurance (March 2017)

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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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