Press Release

VIS Credit Rating Company Maintains IFS Rating of Pakistan Reinsurance Company Ltd.

Karachi, April 2, 2021: VIS Credit Rating Company Ltd. (VIS) has maintained the Insurer Financial Strength (IFS) rating of Pakistan Reinsurance Company Limited (PRCL) at ‘AA’ (Double A). Outlook on the rating has been revised from ‘Stable’ to ‘Positive’. The ‘AA’ rating signifies very high capacity to meet policyholder and contract obligations. Risk is considered modest but may vary slightly over time due to business/economic conditions. Previous rating action was announced on December 19, 2019.

The assigned rating continues to remain underpinned by the strong sponsorship of Government of Pakistan (GoP), which directly and indirectly owns 75% controlling stake in the organization. PRCL operates as the sole national reinsurer in Pakistan and all insurance companies are mandated to offer at least 35% of their business to PRCL under treaty arrangements, whereby the company enjoys discretion for first right of refusal.

The revision in rating outlook takes into account higher growth in business volumes of PRCL vis-à-vis the industry’s growth during 9M’20. Positive outlook also incorporates significant improvement in profitability profile of the company on the back of improved underwriting and investment performance coupled with growth in the window takaful operations. Reduction in expenses and selective underwriting approach culminating to lower loss ratios, both translated to higher underwriting profit during the period under review. The investment portfolio of the company continues to generate a steady stream of income and provides significant contribution to the bottom-line. Both credit and market risk arising from the portfolio is considered manageable. As per the management, selective business exposure within profitable segments will aid growth in business volumes and profitability of the company going forward.

Risk adjusted capitalization levels are considered sound in view of healthy capital coverage of claims. With increase in equity base on account of profit retention, operating leverage was reported lower, thereby indicating room for further growth. On the other hand, financial leverage ratio of the company increased considerably at end-9M’20 on account of increase in technical reserves. Meanwhile, liquidity profile is considered satisfactory as reflected by sizable liquid assets maintained in relation to technical reserves. Decrease in financial leverage ratio and further improvement in profitability metrics are considered key rating sensitivities going forward.

PRCL has a diversified reinsurance panel with mostly ‘A’ and above rated companies. Governance framework at PRCL depicts room for improvement. Timely completion of the Board of Directors (BoDs), stability in the senior management team and timely mitigation of risks identified by the management are considered important from the ratings perspective.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.



Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: General Insurance (November 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Meth-GenInsurance201911.pdf

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .