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The Pakistan Credit Rating Agency Limited

Date
06-Oct-2017
Analysts
Jhangeer Hanif
jhangeer@pacra.com

Faraan Taimoor
faraan.taimoor@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • General Insurance and Takaful Operator (Jun 16) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Insurer Financial Strength (IFS) Rating | General (Jun 17) [View]

Related Research

  • Sector Study | General Insurance (Nov 16) [View]
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PACRA Maintains IFS Rating of Pakistan Reinsurance Company Limited
 Rating Type Insurer Financial Strength(IFS)
Current
(06-Oct-2017-)
Previous
(04-Apr-2017)
 Action Maintain Initial
 IFS Rating AA AA
 Outlook Stable Stable
 Rating Watch - -

This rating takes into account the company’s strong sovereign sponsorship, with the government holding 75% of the shareholding directly and indirectly. The healthy financial profile of Pak Re, as reflected in strong liquidity level is also providing good coverage against outstanding claims. The company business profile is supported by around one-fourth share in country’s total reinsurance business. Pak Re has adequate underwriting performance and the loss ratios are largely aligned to industry average. The company is putting extensive effort in order to further improve its underwriting practices. The company’s business acquisition cost, though low, has room for improvement. Pak Re has a sizeable investment book, a major portion of which is deployed in low-risk government papers and bank placements. Government ownership and first right of refusal for up to 35% of reinsurance business in the country are key rating factors. Leverage indicators remain low, indicating room for further growth of the company, in an already diminutive reinsurance sector of the country.

PakRe has an adequately engaged and functional Board of Directors and apex management team. This should help in putting a comprehensive medium-term strategic plan. Improving operational efficiency and better utilization of technology tools should be prioritized. Moreover, turnaround time of claims settlement and premium recovery can be improved. Favorable outcome of certain issues with Sindh Revenue Board would release liquidity; timely resolution is important. Meanwhile, upholding good governance standards remain critical.
About the Entity
Pakistan Reinsurance Company Limited (PakRe), established in 1952 and listed on Pakistan Stock Exchange, operates as the sole Pakistan based reinsurer. It is owned by the Federal Government (75%); through Ministry of Commerce (45%) along with the Employee Empowerment Trust (6%), and State Life Corporation (24%). PakRe possesses the first right of refusal for upto 35% of reinsurance volume offered by all insurance companies existing in Pakistan.

The board of PakRe comprises nine members, of which five are nominated by Federal Government, one is nominated by State Life Insurance Company and one is vacant. The CEO, Shakeel Ahmed Mangnejo, appointed recently in September 2017, is a high ranking officer of Pakistan Administrative Group and carries over two decades of civil services experience. Noticeably, he remained Home Secretary Sindh and worked as Director General EOBI and Director Finance Trading Corporation of Pakistan. The company’s top management consists of qualified and experienced professionals and are actively working on institutionalizing policies and procedures at Pak Re.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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