Press Release

JCR-VIS Reaffirms IFS Rating of Reliance Insurance Company Limited

Karachi, December 31, 2014: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Reliance Insurance Company Limited (RICL) at ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on September 30, 2013.

The rating incorporates sound capitalization level of the company that has strengthened over time on the back of retained earnings. Overall liquidity profile of the company is also considered sound; operating cash flows are positive in addition to which the company carries a sizeable portfolio of marketable securities.

Both earnings and cash flows are primarily dependent on investment activity; the company’s investment portfolio includes a sizeable amount of equities. Earnings may experience volatility in line with stock market as equity portfolio is marked to market and unrealized gains are taken to income, which comprise a sizeable proportion of investment income.

In recent years, growth in business volumes has primarily emanated from marine aviation segment, which is almost entirely passed on to reinsurers. As a result, retention levels have continued to decline and growth in net premium has been much slower than gross premium. Adequate set of treaty arrangements has kept the net account protected. However, the company’s expense ratio is considerably on the higher side, in view of which, underwriting operations continue to remain under stress. The company intends to procure additional motor business by participating in a government scheme. Given the lack of control over client screening, ability to generate positive earnings from this business is considered uncertain by JCR-VIS; results will be tracked on an on-going basis.

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

Applicable rating criterion: Methodology: General Insurance (Nov 2003)

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 2014 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .