JCR-VIS reaffirms Insurer Financial Strength Rating of Pakistan Reinsurance Company Limited at AA

Karachi, April 26, 2016 (PPI-OT):JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength (IFS) Rating of Pakistan Reinsurance Company Limited at ‘AA’ (Double A). Outlook on the rating is ‘Stable’. The previous rating action was announced on November 28, 2014.

The assigned rating takes into account the strong sponsorship with the sovereign directly and indirectly having a shareholding of 75% in the company. PRCL is the sole local reinsurer in Pakistan and enjoys confirmed business from insurance companies, for which it is compulsory for insurance companies to offer 35% of their surplus business to the company. Given that PRCL has first right of refusal, it has underwritten selective business over the years. Going forward, the management plans to increase its share of business, which is currently below the stipulated limit in most cases.

During 2015, casual vacancies were filled at the Board level. Moreover, some vacant senior management level positions were also filled including Chief Internal Auditor and Company Secretary. Position of CEO has remained vacant since 2013. Timely appointment of the same is considered essential from a governance perspective as also the future business strategy.

The rating incorporates sound capitalization level of the company that has strengthened over time on the back of improved internal capital generation. Moreover, leverage indicators have remained low indicating significant room for growth. The assigned rating also reflects adequate liquidity profile and improved claims performance of the company on net account.

Over the years, the company has built a sizeable investment portfolio, a major portion of which is deployed in mutual funds and government securities, providing a source of earnings and liquidity. Insurance debt in relation to gross premium has remained on the higher side; rising trend in premium receivables may need 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