Pakistan Credit Rating Agency maintains Insurer Financial Strength of Silver Star Insurance Company Limited

Lahore, October 10, 2013 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the Insurer Financial Strength (IFS) rating of Silver Star Insurance Company Limited (SSICL) at “A-” (Single A minus). The rating denotes strong capacity to meet policyholder and contract obligations. Risk factors are moderate, and the impact of any adverse business and economic factors is expected to be small.

The rating reflects strength of SSICL’s risk absorption capacity emanating from a sizeable equity base. A dominant portion of this base is deployed in liquid investment avenues, providing requisite cushion against insurance claims.

Nevertheless, the return on investment is low compared to peers due to the company’s business model whereby most of the funds are kept in low earning bank deposits to lure business. Hence, the company’s reliance on underwriting income is high.

The rating takes benefit from low loss ratio backed by management’s prudent strategy to underwrite small size risks with diverse customer base. SSICL’s underwriting performance remains strong.

Although sizeable impairment in receivables dented the absolute size of the profits, the overdue portion is almost fully provided. Nevertheless, the sheer size of insurance receivables is still high, implying utilization of a portion of SSICL’s liquidity in working capital.

The rating is dependent on the management’s success in achieving its targeted business volumes while ensuring robust underwriting profitability. The company must attain efficacy in its cash management framework so as to enable sustained addition to liquid assets. Any material decline in the business performance and/or significant piling up of insurance related assets, thereby increasing the credit risk, would be important.

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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