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The Pakistan Credit Rating Agency Limited

Date
02-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]
  • Methodology | Insurer Financial Strength (IFS) Rating | General (Jun 17) [View]

Related Research

  • Sector Study | General Insurance (Nov 16) [View]
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PACRA Upgrades IFS Rating of SPI Insurance Company Limited
 Rating Type Insurer Financial Strength(IFS)
Current
(02-Oct-2017-)
Previous
(07-Jun-2017)
 Action Upgrade Maintain
 IFS Rating A A-
 Outlook Stable Positive
 Rating Watch - -

The rating reflects substantial improvement in the business profile of the company. The company continues to demonstrate sizeable growth in its topline and the portfolio mix is well-balanced. The client base is direct with less reliance on bank business. The organization takes benefit from synergistic approach at group level - United International Group (UIG) - and replicates the group's established practices. With reported loss ratio, the company demonstrates underwriting profitability. The contribution from alternative income stream – investment book – is small; needs to improve. Improved equity size and hence liquidity supported by the recent right issue provides cushion to the risk absorption capacity.

The rating is dependent on the management's ability to capitalize on its brand and group's well-built platform for business expansion. At the same time, the liquidity level must improve and consequent income stream should likewise go up; herein attrition beyond a requisite threshold would negatively impact. Recovery of overdue receivables is crucial.
About the Entity
SPI Insurance Company Limited (SPI), an unquoted public limited company, was established in 2005. The company is majority-owned by UIG (69%), followed by Silkbank (23%) and Saudi Pak Leasing (8%). The overall control of the company vests in a BoD comprising seven members; five members represent UIG, whereas two members represent Silkbank. UIG is a diversified group having interests in insurance, tracking business, IT, agriculture, insurance brokerage and microfinance-banking. UIG, by capitalizing on the platform of two insurance companies - UIC and SPI - has achieved a sizeable market share of 8% at end-Jun17.

Mr. M. A. Shahid, CEO/MD since beginning Jun-11, is a law graduate having extensive insurance industry experience, especially with The United Insurance Company of Pakistan - a flagship company of UIG. He is assisted by a team of experienced professionals.
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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