JCR-VIS reaffirms Insurer Financial Strength rating of Alpha Insurance Company Limited

Karachi, December 15, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the Insurer Financial Strength (IFS) rating of Alpha Insurance Company Limited (AICL) at ‘A’ (Single A). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 10, 2014.

The assigned rating incorporates financial profile and demonstrated support of the parent institution, State Life Insurance Corporation of Pakistan, the largest life insurance company in the country and owned by the Government of Pakistan. Rating also reflects adequate capitalization and liquidity profile of Alpha Insurance Company Limited (AICL). Management is focusing on enhanced centralized controls and implementation of risk management measures in order to reduce high level of insurance debt and improve underwriting performance.

Gross premiums of the Company have depicted a noticeable decline in 2014. Given the current trend in gross premiums during the ongoing year, the company is expected to remain short of the target gross premium of Rs. 270m for 2015. As per management, shortfall is a result of selective underwriting and concerted efforts by the management to reduce reliance on co-insurance business. Going forward, the management is targeting steady growth (20%-30%) in business volumes over the next three years. Growth is planned in the health insurance segment where AICL plans to engage a third party to benefit from lower cost and improved service.

Reinsurance panel of the company remained unchanged for 2015. Treaty capacities of AICL are currently on the lower side in relation to peers which is a hindrance for growth in business volumes. Resultantly, management plans to enhance total treaty capacity while gradually increasing retention in all key business segments. Moreover, the company intends to negotiate a whole account XoL treaty to replace the existing separate XoL treaties for each segment.

Over the years, the company has built a sizeable investment portfolio, a major portion of which is deployed in government paper, providing both a stable source of earnings and liquidity. Given the quantum of liquid assets on books, overall liquidity profile is considered adequate. Nevertheless, high level of insurance debt needs to be arrested.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk