JCR-VIS reaffirms Insurer Financial Strength rating of PICIC Insurance Limited at BBB+

Karachi, December 22, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the Insurer Financial Strength rating of PICIC Insurance Limited (PIL) at ‘BBB+’ (Triple B Plus). Outlook on the rating is ‘Stable’. The previous rating action was announced on December 13, 2012.

The assigned rating incorporates PIL’s modest risk adjusted capitalization levels and weak liquidity profile. Equity base of the company has reduced on account of increase in accumulated losses; accordingly, leverage indicators have trended upwards and are considered to be on the higher side.

In order to arrest this trend, sponsors plan to enhance capitalization levels through a subordinated loan or rights issue worth Rs. 350m. Liquidity profile of the institution has weakened on a timeline basis as evident from a rising level of insurance debt, declining level of liquid assets in relation to technical reserves and cash outflow from operations. Timely realization of equity injection plan or sponsor loan is considered necessary to improve the company’s risk profile.

PIL has reinsurance arrangement with 6 different reinsurers. SCOR Global P and C is the lead reinsurer with a 35% share in treaties while Pakistan Reinsurance Company Limited (PRCL) also has a 35% stake in treaty for major business segments.

Treaty terms negotiated for 2014 included increase in treaty capacity for fire and marine business while retention on net account was also higher for marine business.

Some growth has been witnessed in business volumes subsequent to end-June’14 with management projecting gross premiums of Rs. 740m for full year 2014. The new sponsors have indicated capacity to enhance business volumes of PIL.

While underwriting losses have persisted over the past years, there is a decline on a quarter on quarter basis with 3Q14 underwriting loss alone being significantly lower.

During the on-going year, KM Enterprises (Pvt.) Ltd completed the acquisition of shareholding of PIL and now holds 59.43% of the company’s shares. Subsequent to change in ownership, there have been a number of changes at the board and senior management level. Mr. Afroz Quraishi has assumed charge as Chief Executive Officer / Managing Director of PIL.

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

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