Press Release

JCR-VIS Reaffirms IFS Rating of EFU General Insurance Limited

Karachi, August 25, 2017: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) Rating of EFU General Insurance Limited (EFU) at ‘AA+’ (Double A Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on July 11, 2016.


Rating derives strength from the strong competitive position of EFU in the private insurance industry, having a market share of 25% in gross premiums at end-December 2016. The assigned rating also takes into account the strong capitalization and liquidity profile of the company along with improving operational indicators. Management team of the company comprises highly experienced individuals that have been associated with EFU for several years.
The rating indicates a very high capacity to meet policy holder/contractual obligations; risk is considered modest.

In line with industry growth, top line of EFU has also depicted improvement with gross premium (including contribution from Takaful operations) crossing Rs. 17b in 2016. Growth momentum has continued in the on-going year, as premiums underwritten in 1Q17 were 12% higher than the corresponding period last year. The company’s business mix continues to be led by fire and property damage segment including engineering and terrorism risks.

The company has adequate reinsurance arrangements in place with a diverse panel of reinsurers. Some increase in priority limits has been noted over time; however, EFU has adequate capacity to absorb claims falling on net account. Size of maximum per risk claim remained unchanged which on net account is considered manageable in relation to the company’s loss absorption capacity.
Overall results from underwriting operations have remained positive.
The bottom line was also strong as the company continues to generate steady stream of income from a sizeable fixed income portfolio. Investment portfolio comprises a mix of equities, sovereign instruments, term deposit receipts and real estate properties. Given the portfolio composition, the company’s investment income has depicted stability. Both credit and market risk arising from the portfolio is considered manageable.

Imposition of higher tax rate on investment income is likely to have a negative impact on the bottom line across the insurance industry in the coming years.
With an improving bottom line, enhanced shareholder’s equity resulted in improvement in leverage indicators of the company. Liquidity profile of the company is considered sound with insurance debt in relation to total gross premium comparing favorably to most peers.
Aging profile of insurance debt is also considered satisfactory. Rating will remain to be underpinned by continued prudence in underwriting policies and sound reinsurance treaty arrangements.


For further information on this rating announcement, please contact the undersigned (Ext: 201) or Ms. Muniba Khan (Ext: 214) at 35311861-70 or fax to 35311872-73.

Javed Callea
Advisor

Applicable Rating Criteria: General Insurance (September 2016)
http://www.jcrvis.com.pk/kc-meth.aspx

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 2017 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .