Press Release
JCR-VIS Reaffirms IFS Rating of Reliance Insurance Company Limited
Karachi, December 31, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Reliance Insurance Company Limited (RICL) at ‘A’ (Single A). Outlook on the assigned ratings is ‘Positive’. The rating signifies high capacity to meet policyholder and contractual obligations; risk factors may over time due to business/economic conditions. The previous rating action was announced on November 27, 2017.
The assigned rating reflects sound capitalization level and liquidity profile of the company. Underwriting quality is also considered prudent as claims ratios (both gross and net) remain on the lower side. Strong reinsurance program and sustainability in quantum of underwriting profits will continue to be key determinants for future direction of rating.
Gross premiums (excluding takaful premiums) of RICL decreased by 4.0% vis-à-vis the industry growth of 8.1% in 2017. Resultantly, market share of the company declined to 1.65% (2016: 1.85%) in 2017. However, overall gross premiums (including takaful contributions) have increased to Rs. 1,230.2m (2016: Rs. 1,226.2m) in 2017, depicting a growth of 0.3%. The company continues to maintain a diversified portfolio mix with marine, aviation and transport segment contributing the highest share followed by fire & property and motor segments. However, proportion of marine, aviation and transport segment has decreased. Going forward, management expects to cover the shortfall through other conventional business segments, especially fire and motor segments, along with growth initiatives in window takaful operations, which have already depicted healthy growth in 9M’18.
Reinsurance panel of the company is considered strong with Swiss Re as the lead reinsurer. Retention level and treaty capacities have witnessed steady increase in view of anticipated growth in business volumes. Underwriting profit of the company depicted modest growth in 2017 on account of lower incidence of claims in comparison to the preceding year.
The company incurred sizeable loss on investments in 2017 on account of downturn in equity market. Investment performance has improved in 9M’18 with the company booking sizeable unrealized gains. Management may need to strengthen its underwriting operations in order to sustain its profitability and capitalization indicators.
Liquidity profile of the institution remains sound with sizeable liquid assets in relation to liabilities and low insurance debt in relation to gross premiums. Leverage indicators of the company are also considered sound and within prudent limits.
For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.
Javed Callea
Advisor
Applicable rating criterion: Methodology: General Insurance (March 2017)
http://jcrvis.com.pk/docs/Meth-GenInsurance201702.pdf