Press Release

VIS Reaffirms IFS Rating of Pakistan Reinsurance Company Limited

Karachi, December 19, 2019: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) rating of Pakistan Reinsurance Company Limited (PRCL) at ‘AA’ (Double A). 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’. Previous rating action was announced on October 12, 2018.

The rating draws comfort from the strong sponsorship of Government of Pakistan, directly and indirectly controlling 75% share. The assigned rating derives strength from improved underwriting performance of PRCL along with stable investment income. Sound capitalization indicators, high solvency level along with robust liquidity profile of the company remain key rating drivers. Leverage indicators of the company continue to remain within manageable levels.

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. Historically, PRCL maintained a low share in treaties with most insurance companies. In view of the aggressive stance of the management, PRCL increased its share of business with insurance companies having profitable treaties. As a result, underwriting results of the company improved significantly during FY18 and 9M19. Overall treaty business remains a loss-making segment for PRCL in a few segments; management is focusing its efforts towards improving the same. Maintaining these profitability metrics will remain a key rating driver. With an improved claims ratio, combined ratio of the company remained below 100% mark.

Investment portfolio has grown over the years, translating into healthy investment income for the company. However, investment portfolio of the company was revised in the back drop of interest rate scenario and downward trajectory in the stock market. During the years, management addressed significant gaps in the senior management cadres, which is considered important from a rating perspective. However, there was a change in the senior management team with resignation of CEO. Timely appointment of key executives is considered essential from a governance perspective as also the future business strategy.

For further information on this rating announcement, please contact Mr. Atiq Anwar Mahmudi (Ext: 208) or Ms. Muniba Khan (Ext: 215) at 35311861-70 or fax to 35311873.

Jamal Abbas Zaidi

Applicable Rating Criteria: General Insurance (November 2019)

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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