Karachi, November 8, 2016: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Jubilee General Insurance Company Limited (JGI) at ‘AA+’ (Double A Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 31, 2015.
Assigned rating of the company derives strength from JGI’s long existence and being amongst the largest private general insurance companies in Pakistan. Rating also factors in its sound capitalization indicators, strong liquidity profile, improving operational indicators supported by sound underwriting policies. JGI’s senior management team comprises qualified and experienced resources; majority of them having long association with the company.
In 2015, growth in JGI’s premium base outpaced industry growth rate; as a result, market share of JGI stood higher. Business mix witnessed a tilt in the outgoing year with a lower share of fire and property premiums vis-à-vis the preceding years. While on the other hand, share of engineering and bond segments increased on account of new infrastructure projects coming in; management anticipates further growth in these segments in the near future. Moreover, motor business is also expected to grow on the back of improving law and order situation in the country. Takaful Window Operations also showcased an improvement in terms of business volumes. Given the prevailing price competition in Takaful business, JGI plans to penetrate the market by approaching small & medium sized businesses and retail clientele.
The assigned rating also takes into account improved underwriting performance of JGI. Claims, on both gross and net basis, depicted a favorable trend in 2015. However in HY16, loss ratios were reported higher as a result of a few high quantum claims experienced in fire and property segment. These losses were adequately covered with strong reinsurance arrangements; risk profile of the panel is considered sound with majority of reinsurers rated ‘A-’ or higher. In line with its growth strategy and soft reinsurance market, management increased total treaty capacities of bond, engineering and fire segments for 2016.
In line with past trends, profitability derived strength from sound underwriting performance of the company coupled with sizeable contribution from the investment income. JGI managed to control expenses and despite the imposition of super tax, bottom-line of the company improved in 2015. Going forward, management of the company expects profit before tax to be higher in view of aggressive growth plans. However, increase in effective tax rate may affect the bottom line adversely.
Leverage indicators also depicted improvement on the back of higher profit retention, hence leading to an enhanced equity base. Investment mix depicted changes with lower exposure in mutual funds on account of imposition of uniform tax on all income sources. Subsequently, liquidity from the same was deployed in listed equities. Despite changes in the portfolio, credit and market risks emanating from it are considered manageable. Liquidity profile is also considered sound in view of presence of sizeable liquid assets in relation to total liabilities.
For further information on this rating announcement, please contact the undersigned (Ext: 249) or Mr. Javed Callea (Ext: 234) at 021-3511861-70.
Jamal Abbas Zaidi
Applicable Rating Criteria: Methodology: General Insurance (Sep 2016)
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