Press Release

JCR-VIS Reaffirms IFS Rating of Askari General Insurance Company Limited

Karachi, April 15, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Askari General Insurance Company Limited (AGICO) at ‘A+’ (Single A Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on February 18, 2014.

AGICO is mainly sponsored by the Army Welfare Trust (AWT). The Fauji Consortium (FC) has indirect shareholding through Askari Bank Limited (ABL). In 2014, ABL announced divesture of its entire stake to AWT subject to regulatory approval. The divestment shall allow AWT to have controlling stake in AGICO.
The company has depicted growth in business volumes; portfolio continues to be dominated by motor and health segments. AGICO has a diversified reinsurer panel; business has been placed with reputable reinsurers having Insurer Financial Strength (IFS) rating in the “A” band and above. Reinsurance arrangements provide adequate coverage against larger risks; given the business mix, a significant quantum of smaller risks is retained on net account.
Overall claims performance has remained satisfactory over time. The company has depicted an improving trend in income from core underwriting operations. Underwriting profitability has largely emanated from motor and engineering segment while health business was marginally in losses. Motor has been traditionally profitable with strong internal controls. The management is in the process of revising rates for loss incurring clients in health; its impact will be visible in due course of time. The company carries a sizable investment portfolio; about 2/3rd is invested in cash/income funds. The portfolio is a recurring source of investment income that continues to augment the bottom line.
Insurance debt in relation to gross premium has trended upwards in 2014. Operating cash flows stood positive in 2014 as compared to a cash outflow in the preceding year. There is considerable liquid reserve available providing adequate coverage to total liabilities. Leverage indicators have improved over time on the back of internal capital generation.
AGICO has applied for a window takaful operation license to Securities and Exchange Commission of Pakistan. Takaful operations are expected to begin during 2Q15; pending regulatory approval. The board has depicted stability and includes one independent director; there were two changes at senior management level positions during 2014. Implementation of an integrated ERP is complete; the system is likely to enhance efficiency in internal controls.
For further information on this rating announcement, please contact the undersigned at 021-3511861-70 or Mr. Maimoon Rasheed at 042- 35743411-13.


Javed Callea
Advisor

Applicable Rating Criteria:
Methodology: General Insurance (Nov 2003)
http://www.jcrvis.com.pk/images/methodology.pdf

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