Press Release

JCR-VIS Upgrades IFS Rating of Reliance Insurance Company Limited to A

Karachi, September 30, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the Insurer Financial Strength (IFS) rating of Reliance Insurance Company Limited (RICL) from ‘A-’ (Single A Minus) to ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’.

The upgrade takes into account improved capitalization level, achieved on the back of higher internal capital generation and market value of investments. While the company registered cash outflow from operating activities in 2012, liquid assets carried on balance sheet depicted a rising trend as the market value of listed equities portfolio increased during the period. In 1H13, the company has generated positive cash flows from operating activities. The quantum is still small and sustainability will be tested over time.

The company has continued to post growth in premium base, led by marine business; given higher cession level, it’s translation into net premium revenue has been less significant. Gross claims ratio had escalated significantly in 2012 though impact on net account was minimal, indicating adequacy of reinsurance arrangements in place. The profile of the reinsurance panel has depicted some weakening with exit of the lead reinsurer from the market.

The results from underwriting operations remain under stress on account of a large expense base. The management is taking various measures to curtail expenses, including rationalization of branch network and staff strength, among others. The results of these steps will be evident over time.

Improved investment performance has provided significant support to the company’s earnings profile, with a significant portion of investment portfolio deployed in equities. While the gains recorded in recent periods may not be sustainable, the dividend yield on company’s portfolio has also remained healthy and may be a more recurring source of income.

For further information on this rating announcement, please contact Mr. Abdur Rahim, ACII (Ext: 508) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-71 or fax to 021-35311872-3.


Jamal Abbas Zaidi
Deputy CEO

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