Press Release

VIS Reaffirms IFS Rating of Pak Qatar General Takaful Limited
 

Karachi, January 2, 2023: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (‘PQGTL’ or ‘the Company’) at ‘A (IFS)’ (Single A (IFS)). The rating signifies high capacity to meet policyholder and contractual obligations. Risk factors may vary over time due to business/economic conditions. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on March 31st, 2022.

Rating of the Company incorporates sponsor profile, which includes prominent Qatar-based financial institutions, such as Qatar International Islamic Bank and Qatar Islamic Insurance Company. Together with Pak Qatar Family Takaful Limited (PQFTL), the Pak Qatar Group offers takaful services in both life and non-life domains. The rating also takes into account the Company’s operational track record and direct market outreach, which presently spans across 9 cities of Pakistan. In addition, the Company maintains indirect presence in other cities, through the distribution network of PQFTL. The establishment of a separate asset management company should allow the group to realize synergies. The rating is underpinned by the Company’s market positioning as a small-sized player in terms of the overall insurance market, as reflected by its market share of 0.9% for 2021 in the private sector non-life insurance industry. Market share in the takaful segment stood at 6.4% for 2021.

Furthermore, the rating incorporates sound credit quality of the reinsurance panel. As per policy, credit quality of the company’s reinsurance panel cannot fall below investment grade (BBB), wherein maximum allotment cannot exceed 20%. The remaining 80% allotment can only be against reinsurers rated ‘A’ or above. Presently, the reinsurance panel of the Company is aligned with the policy. Maximum loss retained on the Company’s books, at any given time, is viewed as manageable.

PQGTL’s profitability metrics remain under stress, as the Company’s bottom line has not depicted any significant change over time and return on equity of 9.8% (average for 2020 & 2021) slightly lags the industry. In 2021 and 9M’2022, we have noted an increase in quantum of underwriting and market positioning of the Company, because of which the Company’s underwriting expense ratio has depicted a declining trend. However, given that both acquisition and net claims ratios have increased, the Company’s combined ratio remained elevated.

The Company’s liquidity profile remains strong, wherein liquid assets provide comfortable coverage and cushion over net technical reserves. Given growth in underwriting and technical reserves in the ongoing year, both operating and financial leverage have increased. The assigned rating remains dependent on maintenance of business and financial risk metrics in line with threshold for the assigned rating.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Mohammad Arsal Ayub, CFA (Ext: 215) at 35311861-70 or fax to 35311872-3.



Javed A. Callea
Advisor

Applicable Rating Criterion: Takaful Companies – March 2022
https://docs.vis.com.pk/docs/MethTakaful202203-final.pdf

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