Press Release

JCR-VIS Upgrades IFS Rating of EFU General Insurance Limited to AA+ with Stable Outlook

Karachi, December 09, 2013: JCR-VIS Credit Rating Company Limited has upgraded the Insurer Financial Strength Rating of EFU General Insurance Limited (EFU) from ‘AA’ (Double A) to ‘AA+’ (Double A Plus). Outlook on the assigned rating is ‘Stable’.

The rating incorporates EFU’s position as the dominant player in the private insurance sector in Pakistan. Senior management team comprises qualified and experienced resources, having long association with the company. The assigned rating depicts very high capacity to meet policyholder obligations.

EFU’s business mix is led by fire and marine segments with about one-fifth of premium underwritten in motor segment. EFU has strong reinsurance arrangements with a diversified panel of reinsurers. Lead reinsurers in major business segments are companies with sound risk profile. Treaty limits have enhanced over time to provide room for growth. Size of maximum per risk claim falling on net account is considered manageable in relation to the company’s loss absorption capacity.

The company has consistently posted improvement in net claims ratio over the period 2008-2012; net claims ratio also compares favorably to peers. Expense ratio is however on the higher side; management is targeting to achieve material reduction in the same over the next three years. Assuming continuation of past trend in net claims ratio, improvement in expense ratio is likely to translate into improved underwriting results.

Of the total investment portfolio, about one-third is deployed in fixed income instruments and real estate whereas the remaining is invested in equities, including the company’s strategic investment in EFU Life Assurance Limited, one of the leading life insurance companies in Pakistan. Given the surge in equity market, the company has booked considerable capital gains on listed equities while dividend stream also continues to be healthy. The company’s exposure to equity price risk is slightly on the higher side; this is proposed to be contained, going forward while the management will continue to build the fixed income portfolio. Operating cash flows have strengthened in recent periods, translating into improved liquid assets carried on balance sheet. Insurance debt continues to remain within manageable limits.

The company has implemented a comprehensive ERP in 2013. The new system is expected to enhance internal control efficiency while improving MIS reporting.

For further information on this rating announcement, please contact Mr. Abdur Rahim, ACII (Ext: 508) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 (10 lines) or fax to 35311872-73.



Jamal Abbas Zaidi
Deputy CEO

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2013 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .