Press Release

VIS Reaffirms IFS Rating of Pakistan Reinsurance Company Limited

Lahore, February 27, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Pakistan Reinsurance Company Limited (PRCL or ‘the Company’) at ‘AA+ (IFS)’ (Double A Plus IFS). 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. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 30, 2022.
The IFS rating assigned to PRCL is underpinned by its strategic importance, being the government owned (75% stake) and the sole local reinsurance company in Pakistan. On the other hand, business risk profile of insurance industry is currently elevated owing to projected slowdown in the domestic economic activity due to high interest rates, rupee devaluation, heightened inflation levels, destruction caused by floods coupled with rate hardening by international reinsurers. The rating incorporates positive trajectory by management of business volumes, substantial improvement in underwriting results on a timeline basis with a well-maintained loss ratio recorded along with sustainable and growing investment income. Notable increase was witnessed in gross written premium during the rating review period on account of inflation adjustments, forex impact and onboarding of new clients. Moreover, significant increase in investment income, largely emanating from higher returns on government securities, supported the bottom line. In terms of composition of investment mix, given the sizable investments in government securities coupled with remaining majority constituting of stable and high rated equity securities, the credit risk emanating from the same is manageable. PRCL is considered sound from solvency risk point of view as the Company has adequate cushion in terms of admissible assets over its liabilities. The rating further incorporates reinsurance arrangements largely with counterparties having sound credit risk profiles with appropriate risk retention on net account to maintain risk appetite of the Company.
Lastly, assigned rating positively reflect the recent implementation of an ERP system highlighting technological advancements, abolishment of pension-based job structure to lower costs and achievement of 3rd tier HR structure. PRCL’s management is also working on their reconciliation and receivable related issues; the majority of the same has been resolved according to the management and controls are in place to address the same. The resolution of aforesaid issues and resolution of accounts qualification will be monitored going forward. The Company continues to be on the ongoing privatization list of the Privatization Commission and the development of the same will be tracked.
For further information on this rating announcement, please contact the undersigned at 042-35723411-13 (Ext: 8008) or email at info@vis.com.pk







Maimoon Rasheed
Director

Applicable Rating Criteria: General Insurance
https://docs.vis.com.pk/docs/GeneralInsurance-2023.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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