Press Release
JCR-VIS Reaffirms Insurer Financial Strength Rating of Takaful Pakistan Limited at BBB+
Karachi, January 23, 2017: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Takaful Pakistan Limited (TPL) at ‘BBB+’ (Triple B Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 23, 2015.
Capitalization indicators of the company have benefited in the ongoing year to some extent from retention of profits. However, given the limited equity base of Rs. 172.4m, capitalization indicators still remain constrained; external support may be required to improve the risk profile of the institution. Sponsors are considering equity injection in the on-going year, which should translate into an improved risk profile for the entity. The company needs to comply with the minimum capital requirement of Rs. 500m by end-December 2017.
Liquidity profile of the company is considered adequate in view of sizeable liquid cushion (liquid assets in relation to liabilities), positive operating cash flows and manageable level of insurance debt. Given the proportion of motor and health business, overall cession continues to be low in comparison to peers. The company has assumed more risk on net account at such retention levels. The outcome of this strategy would be measured over time.
Business momentum has picked pace in the ongoing year, with contribution base being higher than the preceding year. Going forward, the management envisages diverting share of health and motor business toward fire and marine on account of lower claims risk associated with the latter. Effective implementation of the said strategy while maintaining business growth remains to be seen. Historically, the company has reported an underwriting loss from operations. However, magnitude of the loss was curtailed during 2015 and further in 9M16. Reduced losses were a result of prudent underwriting and improved performance of its motor segment; remaining segments remained in loss. In line with management strategy of gradually consolidating health business, underwriting results may improve, going forward.
With the exit of CEO in September 2016, two directors were appointed as executive directors; Mr. Tariq Hussain as CEO of TPL and is responsible for the investment and support functions of the company. Moreover, Dr. Mumtaz Hashmi oversees all underwriting related activities. There were several vacancies in the management team.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-70 or fax to 021-35311873.
Jamal Abbas Zaidi
Advisor
Applicable Rating Criterion: General Takaful Rating (January 2009)
http://www.jcrvis.com.pk/Images/takaful.pdf