Press Release

VIS Maintains IFS Rating of Pakistan Reinsurance Company Limited

Karachi, December 30, 2022: VIS Credit Rating Company Limited (VIS) has maintained the Insurer Financial Strength (IFS) rating of Pakistan Reinsurance Company Limited (PRCL) at ‘AA+’ (Double A Plus). Outlook on the assigned rating has been revised from ‘Positive’ to ‘Stable’. The IFS rating of ‘AA+’ denotes very strong capacity to meet policy holders and contract obligations. Risk factors are very low, and the impact of any adverse business and economic factors is expected to be very small. The previous rating action was announced on March 31, 2022.

PRCL is engaged in the provision of reinsurance and retakaful services in Pakistan. It provides reinsurance protection to the local insurance industry as well as managing insurance schemes assigned by the Federal Government of Pakistan. The assigned rating is underpinned by strong sponsor profile of PRCL with GoP directly and indirectly owning 75% equity stake. In November 2021, the Board of Privatization Commission approved divestment of 20% stake in PRCL, which has not been concluded yet. Major changes in the Company’s shareholding could imply a review of the assigned rating.

The underwriting business of PRCL posted a YoY growth of ~17% in 9M’22 primarily on the back of growth in Engineering and Treaty segments. Given the Company act as the reinsurer of National Insurance Company Ltd. (NICL), the growth in facultative businesses is majorly dependent on securing public sector accounts. Inflationary impact on assets valuation has also boded well for the business growth. Whilst the claims performance remained under pressure due to higher incidence of claims pertaining to Fire and Engineering segments, the combined ratio was largely maintained as the uptick in overhead was minimized despite inflationary environment. Underwriting profitability was recorded notably higher in 9M’22 vis-à-vis SPLY owing to reversal of net provisioning against doubtful debts. Healthy investment income has continued to support the bottom line on a timeline basis.

The investment mix remained dominated with government debt securities, comprising three-fourth of the total portfolio, out of which around 60% constituted treasury bill holdings. Around 40% of the equity portfolio comprised mutual funds while the rest majorly pertained to diverse set of investments in blue chip companies. Given adequate duration of fixed income portfolio, exposure to related market risk remained manageable. Insurance debt as percentage of gross premium increased in 9M’22 and CY21 as compared to previous years, reflecting some increase in exposure to credit risk. Despite being backed by government, operating leverage remained conservative depicting room for growth. Financial leverage was on a higher side owing to increase in underwriting liabilities, meanwhile, the increase in interim period is due to cyclicality and expected to recede largely by year-end.

PRCL has a diversified reinsurance panel with mostly ‘A’ and above rated companies. There has been improvement noted in context of governance framework, with no vacant position and a female representation on Board. Meanwhile, stability in senior management is considered imperative from a rating purview. Audited financials of the Company continue to be qualified in view of substantial unrecognized government dues, which the management is contesting in the court of law. Any negative outcome would have an impact on the financials and rating of the Company.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria: General Insurance (March 2022)

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