Press Release

VIS Maintains IFS Rating of Reliance Insurance Company Limited

Karachi, December 31, 2021: VIS Credit Rating Company Limited has maintained the Insurer Financial Strength (IFS) of Reliance Insurance Company Limited (RICL) at ‘A’ (Single A). The rating signifies high capacity to meet policyholder and contractual obligations. Risk factors may vary over time due to business/economic conditions. Outlook on the assigned rating has been revised from ‘Positive’ to ‘Stable’. The previous rating action was announced on December 31, 2020.

Rating assigned to RICL incorporate the company being owned by two renowned industrial groups of the country, Al-Noor Group and Amin Bawany Group, having business interests in sugar, modaraba, board manufacturing and trading. The assigned rating also takes into account the stability and experience of the management team. New business generation has been a challenge in the outgoing year given the slowdown in economic activity due to COVID-19 outbreak; the same along with discontinuation of business of three main clients in the past two fiscal years has resulted in timeline contraction of the revenues. Given decline in gross written premium, the already nominal market share of the company has further dwindled during the rating review period. Going forward, growth is likely to pick pace in tandem with economic activities; the management expects much of the growth to be driven by fire, marine and motor segments. Revenue growth remains a key rating sensitivity; VIS believes improving market penetration in the highly competitive insurance sector is difficult. The rating incorporates the support of recurring investment income to RICL’s bottom line as underwriting performance remains weak owing to increase in underwriting expenses.

The rating further incorporates reinsurance arrangements largely with counterparties having sound credit risk profiles with appropriate risk retention on net account to maintain risk appetite of the company. Change was manifested in reinsurance treaties on account of switching of treaty capacities within proportional treaty covers as a result of which company’s risk retention on net account as a whole has increased during the ongoing year. The ratings reflect sound liquidity position in terms of presence of sizable liquid assets in relation to net technical reserves; the same is in line with industry participants. Moreover, insurance debt as a proportion of gross premium continues to remain within manageable limits. In addition, amidst muted business growth, both operating and financial leverage continue to remain on the lower side. Going forward, mandatory implementation of IFRS 17 planned by end-Jan’23, against which gap analyses has been submitted to SECP, would impact the overall capitalization metrics; the magnitude of the same is currently unknown industry-wise.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at info@vis.com.pk .



Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: General Insurance (November 2019)
http://www.vis.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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .