JCR-VIS upgrades IFS Rating of Jubilee General Insurance Company Limited to ‘AA+’

Karachi, December 28, 2012 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded the Insurer Financial Strength (IFS) Rating of Jubilee General Insurance Company Limited (Jubilee) to ‘AA+’ (Double A Plus) from ‘AA’ (Double A). Outlook on the assigned rating is ‘Stable’.

Rating takes into account robust financial strength of Jubilee as demonstrated by its strong capitalization and liquidity indicators. Healthy profitability trends and sound dividend payout policy have facilitated the company in improving its equity base in line with growth in underwriting operations; thus, maintaining leverage indicators within prudent limits. Given the sizeable equity reserves of the institution, capacity to absorb losses falling within priority limits, is considered sound.

Moreover, downside risk emanating from the current investment portfolio mix on account of market or credit risk is considered manageable in relation to equity base of the company. Liquidity profile of the institution also depicts strength, with liquid assets providing coverage of more than 100% against outstanding liabilities.

Market share of Jubilee has enhanced over time and the company has maintained its position as the third largest general insurance company in the private sector. Strong growth has been witnessed in the company’s gross premium base on a year on year basis and compares favourably to the industry growth rate. Overall results from underwriting operations for the year 2011 and the on-going year have remained positive.

However, products of FIs and Engineering continue to be loss making segments for the institution. Underwriting guidelines for certain business segments have been revised in view of past claims experience; impact of these changes will be meaningfully tested over time. Future trends in underwriting performance will continue to be tracked by JCR-VIS.

Investment income lends strong support to overall operations of the company with operating ratio averaging around 85% in the past three years. With decline in policy rate, there may be some pressure on the yield of the investment portfolio with income and money market funds comprising two-thirds of the portfolio. Higher allocation to equities is on the anvil, if favorable expectations regarding the stock market persist; though the exposure is not expected to exceed 30% of the investment portfolio.

Major sponsors of the company comprise reputed institutions with sizeable shareholding of Aga Khan Development Network. Senior management team has remained stable and comprises seasoned professionals.

Overall governance infrastructure at the organization is considered sound. Efforts to further improve control environment and operational efficiency are on-going at the institution. Upgrade of IT system is in process and is envisaged to be completed by next year.

For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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