Karachi, March 20, 2017: JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength Rating of Pak Qatar General Takaful Limited (PQGTL) at ‘A-’ (Single A Minus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on March 2, 2016.
The assigned rating continues to be underpinned by the ownership structure of PQGTL comprising prominent Qatar based financial institutions. With a deliberate strategy to consolidate its books, the company restricted its contribution base. During 2016, the company adopted a strategy to report a positive bottom line rather than focusing on aggressive growth targets. As a result, portfolio of PQGTL shed off loss making clients in each segment, especially in motor. Moreover, a lower contribution base was also a function of decline in rates in the industry. The company envisages significant growth in non-motor portfolio in the coming years while keeping motor’s proportion significant in its business mix. On account of lower net contribution, risk of the company has declined in terms of business booked on net account. However, as business grows, the company may consider increasing cession of its segments.
Claims performance of the company has improved on a timeline basis. Segment wise analysis also depicts improvement in claims performance in fire, marine and motor segments. Moreover, the company was able to adopt a cost cutting strategy by merging existing branches as well as centralizing its operations. As a result, the company was able to curtail its operating expenses. Expense ratio was reported higher on account of a lower contribution base in 2016 vis-à-vis previous years. As a result, combined ratio also remained above 100% mark.
As envisaged in the business plan, overall underwriting performance is expected to improve with motor segment restricted to 60% and higher business booked in fire and marine segments. Over the years, the company has posted a loss from underwriting operations with profitability primarily emanated from investment income. Enhancement in equity base may improve the rising leverage indicators; leverage indicators of the company remain on the higher side as compared to peers on account of current capitalization levels. Ability to generate a steady stream of income and support to the bottom line from investments will continue to be tracked by JCR-VIS.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 35311861-70 or fax to 35311872-3.
Jamal Abbas Zaidi
Applicable Rating Criterion: Takaful Companies (December 2016)
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