Press Release

VIS Reaffirms IFS Rating of Pak Qatar Family Takaful Limited

Karachi, June 29, 2022: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar Family Takaful Limited (‘PQFTL’ or ‘the Company’) at ‘A++ (IFS)’ (Single A Plus Plus IFS). The IFS rating of ‘A++(IFS)’ denotes strong capacity to meet policy holders and contract obligations. Risk factors are low, and the impact of any adverse business and economic factors is expected to be small. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on March 31, 2022.

The IFS rating assigned to PQFTL is underpinned by the sponsor profile, comprising prominent Qatar-based financial institutions. Sponsor support has been demonstrated by the financial assistance provided to PQFTL over the years. The rating also incorporates the Company’s market outreach, wherein branch network has been enhanced from 72 as of Dec’18 to more than 160 as of Dec’21, providing the Company distribution access to over 125 cities of Pakistan.

Subsequent to experiencing a one-off 4% contraction in gross underwriting for 2020, PQFTL posted strong growth of 25% in 2021. With PQFTL’s growth exceeding the industry growth, PQFTL was the only private sector insurance entity, in the medium to large-sized segment, that gained market share in 2021 (2021: 3.5%; 2020: 3.4%). In context of the private sector, PQFTL’s market share improved from 7.1% to 7.9%. The growth in business was mainly a function of growth in Company’s branch outreach and onboarding of additional direct sales force. The Company’s business mix remains individual family takaful centered, with the same contributing 73% of the gross underwriting for 2021.

PQFTL’s overall claims performance and underwriting profitability is in line with the industry. However the profitability performance of PQFTL is limited by the scale of business as indicated by the overall RoAE, which trails industry RoAE; it is pertinent to mention that industry RoAE is elevated mainly on account of large-sized players. Our view on capitalization profile draws impetus from consistent support from sponsor and a prudent dividend policy. Overall risk absorption capacity of the Company is considered sound, in view of healthy capital coverage of claims. Also, the Company’s equity size compares favorably to peers. Overall liquidity asset coverage of liabilities compares favorably to industry, albeit leaves room for improvement vis-à-vis VIS’ benchmarks, which require liquid assets to liabilities ratio to be above 1x.

PQFTL manages a total of six funds, with a total fund size of Rs. 26.4b, as of end-April’22. A 5-year review of PQFTL’s fund returns is indicative of superior performance vis-à-vis benchmark returns. In comparison to industry counterparts, PQFTL’s returns compare favorably to median return posted by peers.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or Mr. Arsal Ayub, CFA (Ext: 216) at 35311861-71 (10 lines) or fax to 35311873.

Javed Callea

Applicable Rating Criteria: Life Insurance & Family Takaful (March 2022)

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .