Press Release

JCR-VIS assigns Positive Outlook to Pak Qatar General Takaful Limited

Karachi, December 31, 2014: JCR-VIS Credit Rating Company Limited has maintained the Financial Strength Rating of Pak Qatar General Takaful Limited (PQGTL) at ‘A-’ (Single A Minus). Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on June 19, 2013.

The assigned rating incorporates the demonstrated support of financially strong sponsors, which include reputed Qatar based Islamic financial institutions. Further to a rights issue of Rs. 100m completed last year; sponsors are in the process of injecting further Rs. 100m in two tranches. The first tranche of Rs. 50m has been received by the company while the remaining amount is expected by end-March 2015. Equity injection is expected to help maintain capitalization indicators commensurate with the assigned rating, as the company continues to pursue growth in business volumes. Rights issue is also expected to support the company’s liquidity profile, which has featured weakening on a timeline basis.

Lead by motor and health business, the company posted aggressive growth in business volumes and recorded gross contributions of Rs. 1b in 2013; the company is expected to close 2014 with just under Rs. 1b as well. While the company has managed to curtail claims ratio in the motor segment, the high incidence of claims in the health business, which is retained entirely on net account, has kept underwriting results under pressure. Management is in the process of arranging re-takaful cover for health segment while simultaneously reducing its proportion on books. Motor as a proportion of total business is also projected to decline with growth largely budgeted in fire and marine segments. On the back of these initiatives, the management is projecting improvement in results for the Participants Takaful Fund, which is in deficit. The company’s progress in relation to the same will be tracked by JCR-VIS.

The company has a conservative investment policy with funds primarily invested in GoP Ijarah Sukuk and short term TDRs. Credit and market risk arising from the portfolio is manageable. However, re-investment risk has heightened in view of the declining policy rate scenario. The impact of decline in investment income on account of lower returns is likely to be off-set by the deployment of rights issue proceeds in various investment avenues.

There have been changes at senior management level positions. Moreover, the company has expanded its sales team in pursuit of business targets for FY15. An integrated ERP system has been implemented that is likely to strengthen the overall IT infrastructure.

For further information on this rating announcement, please contact Mr. Abdur Rahim (Ext: 508) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 (10 lines) or fax to 021-35311873.

Jamal Abbas Zaidi
Deputy CEO

Methodology: General Takaful Rating (Jan 2009)

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 2014 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