Press Release

VIS Revises IFS Rating of Allianz EFU Health Insurance Limited

Karachi, July 3, 2019: VIS Credit Rating Company Ltd. (VIS) has revised Insurer Financial Strength (IFS) rating of Allianz EFU Health Insurance Limited (Allianz EFU) from ‘A+’ (Single A Plus) to ‘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 is ‘Stable’. The previous rating action was announced on April 26, 2018.

Current rating of Allianz EFU Health Insurance Limited (Allianz EFU) derives strength from financial profile of its sponsors including Allianz SE and EFU Services (Pvt.) Limited. Assigned rating signifies high capacity to meet policyholder and contract obligations. However, it is constrained by trend in low capitalization levels and high leverage ratios in comparison to peers.

With increasing competition in the health segment, business volumes of the company remained stagnant at Rs. 2.0b. However, in order to grow its top line, management anticipates undertaking an aggressive stance towards underwriting business. The rating is dependent on the company’s ability to grow business volumes while maintaining profitability. While top line of the company remained marginally stable, underwriting profit of the company, though declining, supported the bottom line.

Net profit of the company declined to Rs. 57.0m in 2018 vis-à-vis Rs. 85.1m in the preceding year largely on account of lower investment income. Assigned rating also takes into account low profit retention levels observed on a timeline basis. Given the future growth plans of the company, risk adjusted capitalization levels need to increase in order to keep leverage indicators within manageable levels. Leverage indicators will need to improve in the coming years to commensurate with the assigned ratings. Management of liquidity indicators, which declined during the outgoing year, would be important going forward.

For further information on this rating announcement, please contact Mr. Atiq Anwar Mahmudi (Ext: 208) or Ms. Muniba Khan (Ext: 215) at 021-35311861-71.

Javed Callea

Applicable Rating Criteria: General Insurance (March 2017)

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