Pakistan Credit Rating Agency updates lnsurer Financial Strength rating of State Life Insurance Corporation of Pakistan

Lahore, July 11, 2014 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has assigned “Rating Watch” to the lnsurer Financial Strength (IFS) rating of “AAA” (Triple A) of State Life Insurance Corporation of Pakistan (SLIC).

SLIC enjoys sound market position (~60%) in life insurance industry emanating from dominating market share and extensive distribution network. The insurance premium continued to grow in 2013 though the rate was lower than the market.

SLIC’s policy holders’ obligations are supported by sizeable investment portfolio. Moreover, liabilities of the policyholders are guaranteed by the Government of Pakistan – the key factor supporting its ‘AAA’ rating.

The rating watch captures the strain in the governance framework of the Corporation. The chairman, top executive of the Corporation, has not been appointed since Jun-13. The position was interimly filled from Sep13 to Dec13.

The eight member board was dissolved on resignation of most members. As a consequence, no board meeting has been held, delaying significant strategic decisions and approvals including annual financial results for CY12 and onwards.

The federal government has nominated a four member board in Mar-14, through Ministry of Commerce, though no board meeting has been held yet. Vide a recent circular, operations have been placed in the purview of four executive directors, whereas, the ministry of commerce has oversight of the Corporation.

The rating is dependent on upholding high governance standard, herein, timely appointment of chairman and proper functioning of the board are key essentials. SLIC’s ability to maintain its foothold in the insurance sector is important. This may suffer due to lack of leadership. In this regard, putting up a comprehensive business plan that incorporates changing dynamics of life insurance business, particularly competition, is essential.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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