Press Release

VIS Reaffirms IFS Rating of EFU General Insurance Limited
 

Karachi, October 11, 2021: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) Rating of EFU General Insurance Limited (EFU) at ‘AA+’ (Double A Plus). Outlook on the assigned rating is ‘Stable’. The rating indicates very high capacity to meet policyholder and contract obligations. Risk is considered modest, but may vary slightly over time due to business/economic conditions. The previous rating action was announced on September 11, 2020.

The rating assigned to EFU is underpinned by its strong financial profile and dominant market positioning in the private insurance sector of Pakistan, as evident from its market share of 22.1% in 2020 (2019: 23.3%). During 2020, muted growth was posted by almost all large-sized non-life insurers, as the entire industry growth of ~8% was almost entirely contributed by one medium sized insurer. Given this lackluster growth across the industry, insurance penetration in the country persists on the lower side, while most major large-sized insurers continue to lose market share to competition from small & medium-sized companies. Going forward, growth is likely to pick pace in tandem with economic activities; the management expects much of the growth to be driven by Marine & Motor segments, which were the most affected by the pandemic-induced slowdown.

EFU’s assigned rating is supported by a sound reinsurance panel, with majority of business lines reinsured by companies with ratings in the ‘A’ band. EFU’s cession, which had compared favorably against peers, has trended down in the outgoing year, falling closer to the peer median.

Amidst muted business growth, both operating & financial leverage remain on the lower side. Even though a slight drop in combined ratio was noted, quantum of profitability (inclusive of investment income) remained steady, as reflected by a stable net operating ratio. The Company’s financial risk indicators are aligned with peer median. The assigned ratings remain dependent on maintaining leverage and liquidity in line with the threshold.

For further information on this rating announcement, please contact Mr. Arsal Ayub (Ext: 213) at 35311861-70 or fax to 35311872-73.

Javed Callea
Advisor

Applicable Rating Criteria: General Insurance (November 2019)
https://docs.vis.com.pk/docs/Meth-GenInsurance201911.pdf

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