Press Release
VIS Reaffirms IFS Rating of Pak Qatar General Takaful Limited
Karachi, March 01, 2022: VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (‘PQGTL’ or ‘the Company’) at ‘A-’ (Single A Minus). 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 is ‘Stable’. The previous rating action was announced on January 22, 2021.
Rating of the Company incorporates sponsor profile, which includes prominent Qatar-based financial institutions, such as Qatar International Islamic Bank and Qatar Islamic Insurance Company. Together with Pak Qatar Family Takaful Limited (PQFTL), the Pak Qatar Group offers takaful services in both life and non-life domains. The rating also takes into account the Company’s operational track record and direct market outreach, which presently spans across 9 cities of Pakistan. In addition, the Company maintains indirect presence in other cities, through the distribution network of PQFTL.
The rating is underpinned by the Company’s market positioning as a small-sized player in terms of the overall insurance market, as reflected by its market share of 0.7% for 2020 (2019: 0.8%) in the private sector non-life insurance industry. Market share in the takaful segment stood at 4.8% for 2020 (2019: 6.0%). In the outgoing there has been change at the helm, given appointment of new (Deputy) CEO and other key positions created as a result of organizational restructuring. The Company has subsequently restarted underwriting Health business, which was halted in 2015. The underwriting in Health segment started in Q4’2021 and as per preliminary numbers available, it has allowed the Company to post strong YoY growth in gross contributions. Accordingly, the Company is estimated to have gained market share in 2021.
Furthermore, the rating incorporates sound credit quality of the reinsurance panel. As per policy, credit quality of the company’s reinsurance panel cannot fall below investment grade (BBB), wherein maximum allotment cannot exceed 20%. The remaining 80% allotment can only be against reinsurers rated ‘A’ or above. Presently, the reinsurance panel of the Company is aligned with the policy. Maximum loss retained on the Company’s books, at any given time, is viewed as manageable.
With increased investment in liquid instruments, in combination to shrinkage in net technical reserves, liquidity indicators have improved on a timeline. Decreasing trend in insurance debt to gross premium has been noted, which translates in lower credit risk for the company. The company’s equity base has grown, mainly on account of internal cash generation. The operating leverage has varied during the period under review, given contribution contraction in 2020 and subsequent recovery in 2021. Both operating and financial leverage remain range-bound and commensurate with the assigned rating.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Mohammad Arsal Ayub (Ext: 216) at 35311861-70 or fax to 35311872-3.
Javed A. Callea
Advisor
Applicable Rating Criterion: Takaful Companies - June 2019
http://vis.com.pk/kc-meth.aspx
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