JCR-VIS reaffirms IFS rating of EFU General Insurance

KARACHI: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of EFU General Insurance Limited at ‘AA’ (Double A). Outlook on the assigned rating is ‘Stable’. With a market share of 26.8percent in FY10, EFU is the largest private sector insurance company in Pakistan. Reinsurers on the company’s panel enjoy ratings in the Single A and Double A bands indicating sound risk profile.

Given the limited generation of fresh liquidity, overall liquidity profile has witnessed a declining trend. Nevertheless, capacity of the company to meet policyholders’ obligations is considered strong. While a high combined ratio may be characteristic of large insurance companies, EFU has experienced underwriting losses in several of the past few years. The management, cognisant of the situation, is working to improve the same.

Over the last three years, the company has been successful in generating profits from the motor segment. Moreover, its proportion in business mix is on a decline, due to the slowdown in pace of fresh car financing. Results from tire segment were adversely affected by the floods in 2010. There has hero significant improvement in the same in 2011. Improved priority limits may help in reducing the impact of claims on net account. The management is working towards this end, particularly in the fire segment, which has been the driver of growth in 2011.

Given the high proportion of equities in the investment portfolio, the company’s exposure to price risk arising clue to fluctuation in stock market is sizeable. Plans for enhancing investment management expertise and realigning the portfolio to improve yields axe on the anvil. Developments in this respect will be closely tracked by JCR-VIS for impact on the company’s financial profile.

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